Two major factors are limiting the adoption of cryptocurrencies by the financial mainstream: storage and reporting. Some of the features of digital assets, for instance wallets and private keys, simply do not mesh well with existing financial arrangements. There is also the problem of how to measure valuations, of paramount concern to financial institutions who must always keep their books in good order.
Hoping to address these issues, leading cryptocurrency platform Coinbase has announced that its cryptocurrency custody service, “Coinbase Custody” is today open for business. Over the next few weeks it will be “on-boarding a set of world-class clients that includes leading crypto hedge funds, exchanges and ICO teams.”
Two weeks ago the news broke that Coinbase had been testing such a service with a small group of institutional clients. One of those, Kyle Samani of Multicoin Capital, said that if Coinbase gets it right, “the market will come to recognize that custodianship is a solved problem.” If that happens, it will “unlock a big wave of capital.”
Making crypto accessible by finance
Coinbase has made it its mission to “make digital currency investment accessible to every eligible financial institution and hedge fund in the world.” In order to bring in institutional interest the service must be easy to use and monumentally secure. Coinbase Custody aims to be a one-stop shop for institutional investors due to its combination of the platform’s “battle-tested cold storage for crypto assets,” its “institutional-grade broker-dealer and… reporting services,” and its “comprehensive client coverage program.”
While Coinbase is already responsible for $20 billion of its clients crypto assets, the new service adds segregation of crypto assets on-chain, better reporting and security, plus the option to sign off on transactions using “offline private keys that require a quorum of geographically distributed agents.”
In order to meet regulatory requirements Coinbase has partnered with Electronic Transaction Clearing (ETC), which is both registered with the SEC as a broker-dealer and is a member of FINRA, meaning that it is subject to independent auditing.
Currently, Coinbase Custody is only available in the US and Europe but expansion into Asia is planned for later this year. Provided that everything goes well with regulators, the platform will soon increase its crypto options from the present menu of Bitcoin, Ethereum, Litecoin and Bitcoin Cash.
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