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By offering advanced security measures, the service is expected to encourage big investors, like hedge funds and sovereign wealth funds, to embrace the virtual currency.
The world’s largest cryptocurrency exchange Coinbase announced on Thursday the launch of a new custodian service targeted specifically at large institutional investors. Called Coinbase Custody, the offering will allow big investors to securely store their digital assets.
“Coinbase is already storing more than $9B of digital currency on behalf of our customers, and we’re excited to bring a new product built specifically for institutional investors,” the co-founder and CEO of Coinbase, Brian Armstrong, announced in a blog post.
“Over 100 hedge funds have been created in the past year exclusively to trade digital currency. An even greater number of traditional institutional investors are starting to look at trading digital assets. By some estimates there is $10B of institutional money waiting on the sidelines to invest in digital currency today,” he noted.
According to Armstrong, the lack of a secure digital asset custodian stops large investors from putting their funds into the crytocurrency. “When we speak with these institutions, they tell 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,” he wrote.
With Coinbase Custody, the exchange is aimed at driving the worldwide adoption of virtual currency and the flow of institutional money into the sector. Since the company is already securely storing billions in assets for its customers, the new service will likely give confidence to investors concerned about the security of digital currency.
To satisfy the needs of institutional clients, Coinbase has developed extra safety measures, which include strict financial controls, such as audit trails and multiple signers, SLAs on money transfers, dedicated account representatives and phone support, multi-user accounts with separate permissions, insurance, and high levels of cyber and physical security.
Coinbase Custody will only be available to users with at least $10 million in deposits. To use the service, investors will be charged a setup fee of $100,000 and will later have to pay a 0.1% monthly fee on digital assets stored. As Armstrong noted, the pricing may change in the future as Coinbase is still rolling out an access to the product. The service is planned to be released next year.
Coinbase is now storing billions of dollars worth of digital assets and is serving thousands of institutions via its GDAX exchange. Since its opening five years ago, the company has raised $216 million from venture capital firms and financial institutions like the NYSE/ICE, USAA, BBVA, Westpac, and MUFG.