Following up on the back of our earlier report connecting Coinbase/GDAX to Morgan Stanley and institutional services – the crypto firm has decided to go all in and align itself with Wall Street. This alignment makes sense in that Coinbase is fit to compete directly with Gemini and do so on a global scale.
Several announcements were made connected to custody, margin, lending, liquidity, and algorithmic trading. Heavy stuff that allows Coinbase to link directly to clients of scale that they have heretofore been unavailable to and for.
Coinbase Custody – partners Coinbase with an SEC-regulated broker-dealer for third-party auditing and financial reporting validation. The custodial product offering maintains a high standard of reporting validation that institutional firms require in broker-dealer relationships.
Coinbase Markets – an electronic marketplace based out of Coinbase’s engineering office in Chicago. ‘Coinbase Markets provides a centralized pool of liquidity for all Coinbase products,’ White added. ‘Over the course of the year, Coinbase Markets will introduce new features like low latency performance, on-premise data center colocation services, institutional connectivity and access, and settlement and clearing services. These additions will allow for a more efficient price discovery process to occur, creating tighter markets, deeper liquidity, and increased certainty of execution.’
Presumably, this is because the engineers around the area are already experienced in traditional exchange-centred products as Chicago is a hub for finance. The tight blockchain talent pool has led exchanges to lure engineers away from banking firms.
Coinbase Prime – a software service that equips institutions with tools for trading cryptocurrency. This product will fill a missing piece of critical infrastructure needed for institutions. Over the course of the year, they intend to offer lending and margin financing products to qualified clients, high touch and low touch execution services like over-the-counter (OTC) trading and algorithmic orders, and new market data and research products. This product launch builds on Coinbase’s previous efforts for building traditional investment types like margin trading into cryptocurrency.
Coverage Group – this initiative focuses exclusively on supporting institutional clients (as opposed to retail clients). The support includes “sales, sales trading, research, market operations, and client services support,” White writes. The group will be based out of Coinbase’s New York office and touts an employee pool with impressive experience in the New York Stock Exchange, Morgan Stanley, plus regulatory bodies like the SEC and CFTC.
Each of these initiatives is serious and grown up. If you look closely enough, what Coinbase is trying to do is offer a ‘plug and play’ institutional crypto solution to global investment banks before they create their own. Offering a quick and easy alternative that satisfies even the biggest and most important client relationships – and doing so quickly – allows Coinbase to endear itself to potential partners that will turn it into the largest player in the world of crypto.
Yet…competition looms. But attempting to be first makes for specific advantages. Let the games begin.