Araby Patch • Jun 29, 2019
This Issuer Spotlight was featured in V.3 Issue 03 of The Protocol Newsletter, an inside examination of the accomplishments within the digital securities industry. The Protocol Newsletter features issuers, issuance platforms, marketplaces, broker-dealers, custodians, marketers, and more, with a specific interest in their real-life stories about what it takes to issue and manage digital securities on public and permission-based blockchains.
Our goal is to provide the digital securities industry with invaluable insights and to serve as a resource for those looking to issue digital securities in the future.
In this issue, we will be taking a closer look at Coinbase Custody.
1. Please describe Coinbase Custody and how it serves the digital asset (including security token) industry.
Coinbase Custody’s mission is to make digital currency investment accessible to every eligible financial institution and hedge fund in the world.
Coinbase’s institutional offerings provide a full-stack solution for professional traders, asset allocators, and issuers and fund managers. The suite combines access to the world’s largest pool of regulated, KYC’d crypto liquidity with high-performance APIs and a high-touch coverage team. Paired with access to our global OTC trading desk and Coinbase Custody’s highly secure and insured offline storage, Coinbase for Institutions offers the trust, security, and performance needed by investors (crypto-first or traditional) to trade with confidence.
Our crypto-first DNA and unmatched technical resources, paired with strong regulatory partnerships as a qualified custodian allow us to introduce innovative services (e.g. staking) and new assets rapidly and in a way that is compliant from day one.
2. How was Coinbase Custody originally conceived? When did you realize that there was a need to be filled, and why Coinbase?
The idea of Coinbase providing a custodial service originated in November 2017. We had fully launched GDAX, now Coinbase Pro, and we realized there was a gap in institutional service.
Over 100 hedge funds had been created that year exclusively to trade digital currency. Traditional institutional investors are starting to look at trading digital assets too (including family offices, sovereign wealth funds, traditional hedge funds, and more). When speaking to prospective clients, they told us that the number one thing preventing them from getting started is the existence of a digital asset custodian that they can trust to store client funds securely. At the time, Coinbase was already storing $9B worth of assets. We had the security and infrastructure in place and decided to provide this same solution directly to institutional clients.
3. What does it take to become a digital asset custodian?
Trust, battle-tested security, and productive working relationships with regulators. Coinbase is a qualified custodian that investors recognize and regulators trust. We are the only major crypto exchange that has never been breached and regularly share our security expertise with the broader crypto space. Technology that’s robust enough for the biggest exchange that’s never been breached.
4. Coinbase Custody can now hold BCAP tokens - what were the challenges you faced to make this possible?
Over the past 12 months, we’ve spent a lot of time and resources to create a repeatable and scalable process for adding support for assets. As an ERC20 token, BCAP was a relatively easy addition to our platform (as opposed to a unique chain or protocol) as we were able to build on top of the foundation of experience we had built adding 16 other ERC20s over the past year. Adding new assets is a truly cross-functional effort at Coinbase as we draw from the collective knowledge of the company to optimize for efficiency and quality. We work with different teams all across Coinbase Custody and Coinbase, getting input, building, and testing simultaneously. Thankfully, we have a great team here and were able to accomplish this fairly smoothly.
5. Describe the moment when Coinbase Custody completed its first iteration on the mission to hold digital assets.
Our mission is far from done so it’s premature to take a victory lap! Ultimately, we can envision a world where we work with regulators to tokenize a range of securities and assets, bringing to this space the benefits of cryptocurrency-based markets — like 24/7 trading, real-time settlement, and chain-of-title. We’re a long way from this goal but we’re excited about continuing the journey.
6. How many different digital assets can be held with Coinbase Custody? How many do you anticipate being held in 10 years?
We currently support 30+ assets on Coinbase Custody. In regards to what we will add, it’s based on client demand. Read more here.
About Coinbase Custody
Launched in 2018, Coinbase Custody offers clients access to the secure, institutional-grade offline storage solution that has been used by Coinbase’s exchange business since 2012. Coinbase Custody is an independent, NYDFS-regulated entity built on Coinbase’s crypto-first DNA, offering the most sophisticated and reliable custody solution in the world.
To learn more, please visit https://custody.coinbase.com/
Securitize delivers trusted global solutions for creating compliant digital securities. The Securitize compliance platform and protocol provide a proven, full-stack solution for issuing and managing digital securities (security tokens). Securitize’s innovative DS Protocol has the highest adoption rate in the industry and enables seamless, fully compliant trading across multiple markets simultaneously. Multiple Securitize powered digital securities are already trading globally on public marketplaces with many more in the pipeline.
To learn more, please visit our website.
Araby Patch is the Director of Marketing for Securitize