Coinbase Estimating $20 Billion Crypto Custody Influx
An insightful update on the status of crypto-specific custodianship – a major barrier said to be keeping institutional money parked on the sidelines – has been provided by way of Bloomberg on Monday.
Per their reports, a spokesperson for Coinbase Inc. – one of the largest crypto-related companies in the industry – “expects to win approval soon to serve clients requiring a so-called qualified custodian that meets tough U.S. standards for guarding assets.”
This comes as Kyle Samani (Managing Partner, Multicoin Capital), a well-established hedge fund manager within the crypto space, revealed that he and a select few others have recently formed “a small group of institutional investors who have been testing” the new crypto custody service being developed by Coinbase; “one of scores of such offerings in development.”
Having told Bloomberg that custodianship represents “the final barrier” preventing a multitude of institutional investors from participating in the young, speculative asset class, Samani predicts that this impediment will soon disappear:
Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital.”
The article also made reference to a handful of other entities that are currently in hot pursuit of developing (or at least exploring) crypto-custody services. These include crypto startups such as Circle and BitGo, the recently-established custody consortium, Komainu, and “at least three giant Wall Street custodians,” Bank of New York Mellon Corp., JPMorgan Chase & Co., and Northern Trust Corp.
Commenting on the financial influx that Coinbase’s custodial service is expecting to attract, once finalized, Sam McIngvale (Product Lead, Custody, Coinbase) went on the record forecasting “about $20 billion in crypto assets.”
Such a predicted figure, Bloomberg reported on Monday, has been upward trending in recent months because “startups hold initial coin offerings, pumping their own tokens into the market.”
The article proceeds to take stock of where each of the above-mentioned enterprises are in relation to developing their respective custodian services. Citing Lex Sokolin (Global Director, Fintech Strategy, Autonomous Research LLP), the consensus appears to be that “the technology answer should be in the market toward end of year, and a traditional one will follow thereafter.”
When they do begin being offered, it will certainly represent yet another lucrative market entered into by the Coinbase juggernaut. Whilst pricing will likely fall with the arrival of competition, Coinbase currently charges their institutional clients a $US100,000 setup fee for digital asset custody. Additional demands include having a minimum balance of $10 million and accepting an assets-under-management (AUM) fee of 10 basis points per month (bpm).
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