Coinbase Seeking Regulatory Approval for a Crypto Custody Service

A deficiency of regulated custody services for crypto assets has been one of the biggest barriersthat has prevented institutional investors from venturing into the sector. However, that could soon change, as crypto exchange, Coinbase, is currently working on a crypto custody service that meets U.S standards.

Coinbase has already held discussions with established Wall Street custodians as it seeks to get the service up and running. The service won’t come cheap as the exchange is reportedly charging up to $100,000 as setup fee and requires a minimum balance of $10 million.

The service has already received praise from hedge fund manager Kyle Samani who is among a group of small investors that have already tested it.

“There are a lot of investors where custodianship was the final barrier. Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital,” said Mr. Samani.

Coinbase is not the only firm that is working on a crypto custodian service as it looks to entice institutional investors into the sector.  Circle and BitGo are also believed to have held talks with regulators as they plan to offer a similar service. Nomura Holdings Inc. and crypto firms Ledger and Global Advisors have also created a custody consortium to provide similar services.

Bank of New York Mellon, JPMorgan and Northern Trust are some of the high profile mainstream financial institutions also working on crypto-custody services. Some custody ventures are currently in the process of obtaining insurance as a way of giving consumers peace of mind.

Approval of such services should go a long way in providing a layer of credibility to a sector that has been shrouded in uncertainty over the years.  Regulated crypto custody services should provide Institutional investors who for the longest time have been on the fence, about pursuing investments in the highly volatile industry.

Crypto custody services would make it easy for Retail brokerages to allow investors add crypto assets to their portfolios, in addition to stocks and bonds. There is already talk of about $20 billion worth of investments flowing into the sector because of the custody services.

Investments into the cryptocurrency space have been ticking higher in recent months despite the downward trend in the prices of major cryptocurrencies.