Through a Medium post on July 2, Sam McIngvale, who is the product lead behind Coinbase Custody, revealed that the company had already accepted its first deposit a week ago. Both the client and the total worth of the deposited assets were undisclosed.
Furthermore, he assured that Coinbase Custody is endeavoring to get more “world-class clients” to sign up for the custody service, including crypto-focused hedge funds and exchanges.
A Custodianship for Institutional Investors
In fact, McIngvale told Bloomberg that as much as 100 large institutions with over $5 billion worth of assets under management are on the company’s radar.
The service actually costs a flat setup fee of $100,000 and a monthly ten basis points (one ten-thousandth) additional fee in asset under management charge. The minimum deposit required to access the service is set at $10 million worth of assets.
While the new cold storage system for custody has been thoroughly tested to suppress the risk of security breaches, McIngvale revealed that the company is planning to subject the product to regular third-party examination. The blog post explained that this measure is taken in order to ensure ultimate security.
Coinbase partnered for the service with Electronic Transaction Clearing, an SEC-registered broker-dealer, and a FINRA member.
Speaking of the availability of the service, McIngvale said:
“Coinbase Custody provides secure storage of crypto assets for institutions in both the US and Europe. Before the end of the year, we hope to bring this offering to Asia as well”.
By enabling cold storage, Coinbase Custody aims to hinder online hackers from accessing offline-stored coins. On the other hand, the service allows customers to transfer their funds from cold storage to segregated hot wallets for trading purposes. Customers can also lend out their stored assets to short sellers and make a profit while flexibly accessing their funds.
A Safe Shelter Amidst a Mess of Exchange Theft and Cryptojacking
Coinbase Custody is not the first of its kind. In fact, many custodianship initiatives directed towards institutional clients sprang up over the last few months, where several companies unveiled their intention to fill the void for regulated custodians in the market. In fact, the urgent need for crypto custody stemmed from a growing reported number of exchange hacks, cryptojacking incidents, and personal data theft.
On July 3, U.S. cybersecurity firm Cybertrace revealed in a report that a total of $761 million was stolen from cryptocurrency exchanges just in the first half of 2018. This amount could rise to $1.5 billion by the end of the year, going up from $266 million in 2017.
This alarming incidence of online hacks is, in fact, one of the main stumbling blocks to clear in order to see huge waves of institutional capital flow into the asset class.