Business & Finance

Coinbase Custody is Open for Business but Faces Criticism

Coinbase, one of the world’s best exchanges, announced to launch their own Coinbase Custody. Coinbase Custody is now officially open for business. It is considered to be a solution for the institutional custody, which aims to address the security concerns that different institutional investors might face.

The official blog post reportedly stated:

Coinbase Custody’s mission is to make digital currency investment accessible to every eligible financial institution and hedge fund in the world”. Moreover, it also highlighted the way they are planning to achieve this and that is, “by striving to become the most trusted and easier to use crypto custody service available.

Furthermore, the official blog post also highlights the unique features of this initiative, which includes:

  1. On-chain segregation of crypto assets
  2. Split is an offline private key that is distributed to different agents so that they can use cryptographic hardware to sign transactions from different investors
  3. It is highly secure because of multiple layers that have been incorporated into the system
  4. Robust cold storage auditing and reporting

The launch of Coinbase Custody means that institutions within Europe and U.S. have the opportunity to store their assets. Coinbase supports assets like BTC (Bitcoin), ETH (Ethereum), LTC (Litecoin) and BCH (Bitcoin Cash). Moreover, Coinbase is also planning to expand the assets they support by opening up their services for different Asian institutions, hopefully at the end of this year.

In order for anyone to set up their Coinbase custody, they need to have a balance of up to $10 million. The set up that investors need is of $100,000.

However, one cannot ignore the customer criticism that continues to rise rapidly. The firm is responsible for placing more than $25 million of customers security at risk illegally. SEC states that Coinbase Custody took this step to fund their own operations in a smooth and efficient manner. Another case that was reported involves a Coinbase Custody partner who paid a total of $80,000 fine for putting customers assets at risks. The ETC used the client’s deposit to fulfill the requirements of the funds they had borrowed. In another case, the Coinbase Custody firm is accused of using up to $17 million of customers deposits as a collateral for the loan they took.

Regardless of all the cases, there was hardly any impact on the customer funds. Yet one cannot ignore the fact that the actions taken by the firm violate the rules and regulations laid down by them under the Customer Protection Rule. The Customer Protection rule makes it the responsibility of the custodians to maintain the physical possession of customer assets. Hence because of these rules they agreed to pay $80,000 for putting customers assets at risk.

Moreover, a recent inquiry done by Mashable on Coinbase Custody highlights at least 134 pages of complaints that were posted by the users of Coinbase. Most of the complaints criticized the company for being underprepared and not able to cope up with the pace of its growth. However, these complaints are to be addressed by Coinbase Custody.

Coinbase still intends to widen its user base to the Japanese Crypto market and is also planning to launch services for different Asian institutions as well by the end of 2018. It is also planning to incorporate more features that can be beneficial for its customers. Features include the access to funds in a flexible manner by segregating the hot wallets and scheduled withdrawals. Moreover, they also aim to enhance their governance solutions by introducing features like proof of stake and distributed form of governance.

Coinbase on their official blog post stated:

As crypto continues its maturation as an asset class and more institutions enter the space, Coinbase is committed to delivering products and services that are tailored to their unique needs. Coinbase Custody delivers the trusted storage service that our clients need to fully immerse themselves in the potential that crypto assets provide.

Only time can tell whether Coinbase is efficient and reliable enough to maintain the assets of its customers. It is now officially launched and is trying to deliver products and services that are tailored to the needs of the investors.

Hiram Nadeem

Hiram is a teacher and media sciences graduate with focus over finance news. Contributes to BlockPublisher with fintech news and sometimes, her opinions. Email: editor.news@blockpublisher.com

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