Coinbase are attempting to lure institutional investors to the cryptocurrency market by launching four new products. The established digital currency exchange company announced today that they will introduce: Coinbase Custody, Coinbase Markets, The Coinbase Institutional Coverage Group, and Coinbase Prime.
Coinbase Respond to Feedback from Institutional Investors
For several years now those involved in the cryptocurrency space have spoken about institutional money flooding into the market. Many thought that the launch of Bitcoin futures by both the CME Group of the Cboe late last year would be the catalyst for traditional money managers and centres of wealth to take up positions in digital currency. However, it didn’t quite work out that way.
There appear to be a few obstacles in the way stopping institutions getting involved by the billions of dollars that they’re easily capable of. The main issues are infrastructural (it’s not easy for anyone to take up multi-million dollar positions in crypto) and also relate to security (crypto offers zero recourse or insurance if anything goes wrong).
It appears Coinbase are taking heed of these issues and attempting to provide a more welcoming platform to those institutions wishing to gain exposure to crypto by launching four new products. Their vice president and general manager, Adam White, told CNBC earlier today:
“We think this [Coinbase’s new product line] can unlock $10 billion of institutional investor money sitting on the sideline… We’re seeing a rapid increase in attention awareness and adoption in the cryptocurrency market.”
To tackle the issues of security, the company plans to launch Coinbase Custody. This would involve a partnership with an SEC-regulated broker-dealer that would securely store digital assets for clients.
The second product will be Coinbase Prime. This will be a trading platform separate from both GDAX and Coinbase itself. It will cater exclusively for institutions whilst drawing on the same liquidity pool. White commented:
“The feedback we heard from institutional investors was ‘Your infrastructure doesn’t meet our expectations… We heard that loud and clear.”
To facilitate the three platforms sharing the same pool of liquidity, Coinbase Markets will be the third product to be launched. This will be an electronic marketplace run from Chicago at a new office.
Finally, there will be the Coinbase Institutional Coverage Group. This will essentially represent a tailored form of customer service, again, aimed solely at institutions. It will be run out of New York City and will provide the kind of support that banks and other such hubs of financial activity are used to dealing with. They’ll also help to introduce the San Francisco-based exchange’s family of products to new clients curious about getting into crypto.
White believes that Coinbase’s launch of such products will cause others to follow suit with similar solutions tailored to institutions. He said:
“Very few want to be first, but everyone wants to be second… There will be fast followers.”
The news about the exchange’s plans to launch such trading options comes on the same day that market researchers Tabb stated that 2018 will be the year that institutional money finally makes it into cryptocurrency. In a report published earlier today, they stated that there were three main obstacles prohibiting any such inflow of funds: uncertainty about regulations, lack of market infrastructure, and lack of institutional-grade sources of market information. It seems that Coinbase are working towards making these obstacles a thing of the past.
White concluded by stating:
“This is our public demonstration [that] we are absolutely here to serve institutions investing heavily to do that.”
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