Coinbase goes into Custody to let investors store digital assets
Who knows how much more appreciation in the price of Bitcoin will be required to encourage notorious cryptocurrency skeptic and JP Morgan CEO Jamie Dimon to endorse investing in digital assets. But when he does, a new company launched by Coinbase called Coinbase Custody will be there to make sure he does it the right way, reports David Penn at Finovate (Banking Technology’s sister company).
“By some estimates there is $10 billion of institutional money waiting on the sidelines to invest in digital currency today,” Coinbase CEO and co-founder Brian Armstrong wrote in a blog post.
He highlighted the number of hedge funds that have been set up solely to trade and invest in Bitcoin and other digital assets, as well as the growing number of family offices, sovereign wealth funds, and others examining ways to add digital currencies to their portfolios. He also noted that the primary obstacle to broader investment in these assets is the ability to store client’s digital assets safely.
With Coinbase Custody, Armstrong has set out to meet a set of factors – ranging from strict financial controls with audit trails to multi-user accounts and exceptional cyber and physical security – he believes FIs require in order to trust a digital asset custodian.
He pointed out that because Coinbase “already store(s) billions of dollars worth of digital assets” for its customers – and currently serves “thousands of institutions” on its US digital currency exchange, GDAX – Coinbase is an ideal partner for FIs looking to securely store digital assets.
“Our goal with Coinbase Custody is to help dramatically accelerate the flow of institutional money into digital currencies over the coming years,” Armstrong wrote.
Institutions that sign up for Coinbase Custodian will get access to an early version of the solution to be released in 2018. The product is exclusively for institutional investors with a minimum of $10 million in deposits. Coinbase presently charges an initial set-up fee of $100,000 plus a fee of ten basis points per month on assets stored.
Founded in 2012 and headquartered in San Francisco, California, Coinbase closed a $100 million Series D round led by IVP in August. This took Coinbase’s total funding to $217 million and a valuation of $1.6 billion.
Coinbase introduced its Instant Purchases option in October, which enables users to buy digital assets directly using a US bank account.