Coinbase, a leading cryptocurrency company started in 2012, has officially unveiled its Coinbase Custody service. The official launch comes just days after it accepted its first deposit from a handful of institutional clients.
The team is based in New York City, New York and will work with FINRA-regulated broker-dealer ‘Electronic Clearing Transactions’ (ETC).
What is Coinbase Custody?
Coinbase Custody offers high net worth individuals, institutions, ICO teams and exchanges digital asset storage solutions. In exchange for a fee (discussed below), the company with safeguard the assets and insure them.
Coinbase Custody offers custodial services for the following digital assets:
- Bitcoin (BTC), Ethereum (ETH);
- Litecoin (LTC);
- ERC20 token; and
- Other undisclosed virtual currencies, coins, and tokens (subject to regulatory approval)
Coinbase Custody pricing
- Setup fee: $100,000 USD
- AUM* fee: 10 bps/month (1.2%/year)
- Minimum balance: $10M USD
*AUM = Assets Under Management; bps = basis point; 10 bps = 0.1%
Say you have $10M USD in AUM in your Coinbase Custody account, your monthly fee would be:
$10,000,000 x 0.1% = $10,000 per month or the equivalent of $120,000 per year.
The company will charge a fee pegged on 10 basis points on all stored assets and this will be levied on a monthly basis. Investors need to maintain a minimum balance of $10M. Coinbase has stated that the fees are likely to change as the product is just being introduced.
Where is Coinbase Custody available?
At the moment, Coinbase Custody supports the following geographies:
- United States
- Asia (coming soon)
The company hopes to be able to launch similar operations in the Asian market by the end of 2018.
Why Coinbase Custody?
Although a centralized custodian goes against some important ideologies behind Bitcoin, it is needed to bring in the big boys of the financial world. As a technical and unique asset, it’s only natural that demand for such a solution is high.
CEO Brian Armstrong had said that Coinbase Custody was being designed to cater for the needs of institutional investors who wanted a trusted digital asset custodian that could securely store client funds.
The custody of digital assets will look to bring onside world-class clients who include “leading crypto hedge funds, exchanges, and ICO teams.”
Investors who choose to use the service will enjoy a number of unique features which includes:
- On-chain segregation of crypto assets;
- Strict financial controls;
- Phone support;
- Guaranteed order processing times; and
- Cyber and physical security controls.
Further, the system has been extensively and rigorously tested and will continue to be exposed to third-party review as part of regular security checks.
Lastly, the sheer nature of Bitcoin and crypto investments is risky, let alone managing the security of those assets. Even the most sophisticated companies have lost millions of dollars from security breaches over the years.
Coinbase noted back in November 2017 that it was looking to tap into the more than “$10B of institutional money waiting on the sidelines to invest in digital currency“.
Needless to say, this marks an important step for the Bitcoin and crypto community. Institutional custodial solutions can potentially bring in billions worth of funds.
About Electronic Transaction Clearing Inc. (ETC)
Coinbase has partnered with ETC, a registered broker-dealer and a leader in “clearance & settlement, securities trading, broker-dealer operations, custody, trade processing technologies and client services.”
Coinbase Custody will “leverage the expertise and systems” of ETC. ETC offers the following services: