Coinbase, which operates the largest crypto exchange in United States, has unveiled several institutional grade new products and services in order to tempt the world’s largest financial institutions to get into the cryptocurrency market.
According to the Coinbase CEO, Brian Armstrong, an increasing number institutional investors are becoming interested in trading (or investing in) digital assets — he estimates that around $10 billion in institutional money is sitting on the sidelines, waiting to be unlocked — and that they are saying that the biggest barrier to entry for them is the lack of a digital asset custodian service that they can trust. And based on what Coinbase has just announced, Coinbase Custody should be a pretty good answer to this problem.
Coinbase Custody, which is being launched in partnership with a SEC-regulated broker-dealer, has the following features:
- strict financial controls: “support for multiple signers, audit trails, segregation of duties, whitelisting IPs, and the ability to set withdrawal limits”;
- dedicated phone support: for confirming fund transfers and changes to accounts;
- SLAs on fund transfers;
- multi user accounts (with separate permissions);
- support for all major coins and tokens;
- regular (cyber and physical) security audits by external firms.
This service is only available to institutional investors with a minimum of $10M in deposits. As for the price, there is an initial setup fee of $100,000 USD, and a fee of 10 basis points per month on assets under custody.
Coinbase Markets already provides “a centralized pool of liquidity for all Coinbase products.” Coinbase is planning to improve this service by opening an engineering office in Chicago. Over the course of the year, Coinbase will be introducing new features such as “low latency performance, on-premise datacenter colocation services, institutional connectivity and access, and settlement and clearing services.” Essentially, what Coinbase will be doing via this office is upgrading its systems so that it can become one of the first crypto exchanges that supports high frequency trading (HFT). HFT requires “low latency performance” or extremely fast processing times (think microseconds rather seconds). “On-premise datacenter colocation” means that HFT firms will be able to put their servers next to Coinbase’s servers to minimize the delay associated with sending data between the HFT firm and the exchange. These improvements should benefit clients in the form of reduced bid-ask spreads.
According to a report in the Wall Street Journal, Adam White, the General Manager at Coinbase, told them in an interview that Coinbase would ensure that HFT firms would not receive any unfair advantages: “We are going to be thoughtful and deliberate in the way we do that, to make sure we don’t disadvantage any market participant over another.”
This is a brand new online interface to Coinbase’s trading platform. It will provide a variety of tools and services designed to meet the trading needs of the institutional investor. During the coming months, Coinbase will be offering “lending and margin financing products to qualified clients, high touch and low touch execution services like over-the-counter (OTC) trading and algorithmic orders, and new market data and research products” as well as platform improvements such as “multi-user permissions and whitelisted withdrawal addresses.”
Here is a screenshot that should give you an idea of what the Coinbase Prime interface looks like:
Coinbase Institutional Coverage Group
This is a new group, based in Coinbase’s New York City office, that will be focused on providing a personalized “white glove” service to institutional investors. The basic idea is to guide these investors through the onboading process and provide them with any help they need (for example, advising them on trading strategies) for navigating “the increasingly complex world of cryptocurrency investing.”