Coinbase Builds Digital Vault for the Rich

Coinbase, already serving as a wallet for up to 10% of Bitcoin holders, will offer a premium service for large clients to store and service their holdings.

Coinbase plans to offer a proprietary custodian service for large clients with more than $10 million in crypto assets. The Coinbase Custody Service will add significantly to the holdings of the US-based exchange, which now holds more than $9 billion of crypto assets in its wallets.

The new product would be aimed at the emerging investment firms interested in Bitcoin. Hedge funds, investment vehicles or high net worth individuals are at the moment trying to discover ways to safely store the assets. 

"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," wrote Coinbase in a Medium blog. 

While Coinbase currently only offers Bitcoin, Litecoin and Ethereum, its cold storage vault would be open for many digital assets. 

With this move, Coinbase may further establish itself as the go-to company to serve as a link between mainstream investments and cryptocurrencies. 

But others see the move as undue centralization, as too many investors would forego the recommendation to "be their own banker" and  protect their holdings. 

Coinbase also plans to offer additional customer support and cyber security. The service price is quite steep, demanding an initial fee of $100,000 plus a monthly fee of 10 basis points (0.1%) of the assets held.

The move of Coinbase recalls that of XAPO wallet, which as a side business offers a secure vault in the mountains of Switzerland, for cold-storing digital assets. The need for higher security and asset handling is paramount when it comes to blockchain. Making a mistake that loses funds is extremely easy to make and happens often, and for institutional investors with fiduciary duty such mistakes can be unacceptable. 

With a price almost touching $8,000 and $10,000 in sight, Bitcoin is becoming more of a store of value digital asset. In addition, high transaction fees may mean Bitcoin would be used for larger, rarer transactions.