Coinbase Is Investing In Strategic Areas To Attract Incoming Institutional Investors
Leading cryptocurrency exchange and blockchain company Coinbase has been investing in strategic areas to make it the partner of choice for the much-anticipated wave of institutional investors.
If 2017 was the year of the rise of cryptocurrency prices, then 2018 is the year that opens the door for institutional investment.
Following the massive rise of the cryptocurrency and ICO markets last year, the next natural step for the industry is the entry of institutional investors. The move is considered to take the industry to a whole new level and put it alongside the traditional stock and forex markets.
However, the big boys of the financial world require certain infrastructure in place before making an investment, most notably:
- Regulation – (most) institutionals won’t invest a penny in unregulated markets/companies
- Security and custody – insitutionals need to know their assets are safe and sound
- Liquidity – big boys have big money so illiquid markets aren’t attractive to them
Cryptocurrency companies have been working and putting things in place that would support the investors when they eventually come in. They are doing this by rolling out products and services that would make things easier for the investors.
One of such companies is Coinbase, which is the largest cryptocurrency exchange in the U.S. by volume and popularity.
Recent strategic investments by Coinbase
San-Francisco based cryptocurrency exchange Coinbase has been planning to ensure that it leads the industry and become the preferred destination for institutional investors.
One of such moves is the launch of its Coinbase Custody service. Coinbase Custody was launched with the aim of tackling the primary concern of institutional investors, which is security.
The service makes use of a wide range of security measures such as on-chain segregation of crypto assets, offline, multi-sig and geographically distributed transaction protection and robust cold storage auditing and reporting.
The service is secured via an SEC-compliant and FINRA-member independent broker-dealer, Electronic Transaction Clearing (ETC).
Asides that, Coinbase has also made some smart acquisitions that have made it a very favorable spot for investors.
Coinbase becomes regulated broker-dealer
The exchange has recently acquired firms such as Digital Wealth LLC, Venovate Marketplace Inc., and Keystone Capital Corp.
Venovate and Keystone have already been registered with the SEC and FINRA as broker-dealers. Digital Wealth, on the other hand, has an SEC-registered investment adviser license, with Venovate having the license as an alternative trading system.
Coinbase also digital identity startup, Distributed Systems which is working on helping people maintain complete control over their digital identities, thus ensuring that their personal information remains safe.
Onboarding finance veteran Jeff Horowitz
Perhaps one of the biggest moves made by Coinbase is hiring Jeff Horowitz, who was a former employee at Goldman Sachs and Citigroup.
Horowitz has been named as the Chief Compliance Officer at Coinbase, as the exchange looks to navigate compliance complexities on a global scale. This move is a very good one, as he brings a wealth of experience in policy, financial services, and corporate governance.
As he settles into his new role, Horowitz is expected to work on issues that would see institutional investors choose Coinbase over the others.
As someone who knows the institutional world, he is expected to bring employ people in hedge funds to help him run his department.
According to some experts in the field, it would make sense for Horowitz to focus his attention on derivatives on crypto assets such as funds, ETFs, and futures.
What is an institutional investor?
These entities typically pool money and invest it on behalf of its investors (pension funds, hedge funds, etc) or for themselves (insurance companies, banks, etc.).
Institutional investors include:
- Insurance companies
- Pension funds
- Hedge funds
- Real estate investment trusts (REITs)
- Endowment funds
- Mutual funds
- Investment advisors