Coinbase Global Inc. has received approval from the New York Department of Financial Services (NYDFS) for its application to launch the Coinbase Custody Trust Company LLC.
The purpose of creating this wholly-owned subsidiary is to provide custodial services to cryptocurrencies which may legitimize the industry even further in the New York market. It has come into notice that the New York regulators have granted permission to Coinbase Custody Trust Company LLC. for providing custodial services to known and established currencies, such as bitcoin, bitcoin cash, ethereum, ethereum classic, litecoin and XRP. However, as a matter of fact, Coinbase does not offer XRP for buying, selling or trading purposes on its trading platforms, unlike the other five cryptocurrencies, but they still acquired the rights to offer XRP custodial services.
COO and President of Coinbase Global Inc., Asiff Hirji has appraised the New York Department of Financial Services (NYDFS) for its efforts that has helped the cryptocurrency industry grow and has identified NYDFS as a major character in the development of the industry. In an interview, Hirji stated:
The New York State Limited Purpose Trust charter, which now enables Coinbase Custody to act as a Qualified Custodian for crypto assets, builds on our unparalleled success as a crypto custodian while holding the company to the same exacting fiduciary standards and oversight of other, mature financial institutions operating in New York.
Hirji described the permission received by Coinbase Custody Trust Company to work as a Qualified Custodian in the crypto industry as a step up in the industry where operations can occur smoothly and an authority will be present to analyze functions of other financial institutions of New York.
Reports suggest that Coinbase Custody Trust Company is not the only Qualified Custodian in the crypto industry now as many other cryptocurrency start-ups have acquired license to offer custodial services. These start-ups include, BitGo, Northern Trust and Prime Trust. As more organizations gain permission to provide custodial services, the industry will continue to grow, and in reality, many more are expected to follow.
After acquiring the license to provide custody services for cryptocurrencies, Coinbase Custody Trust Company has started looking for ways to provide solutions for storing large amounts of cryptocurrencies, as businesses tend to face these problems in the market and for businesses to provide justifications for such high figures can also be a shady matter to get into.
Coinbase Custody describes itself on its website as:
Coinbase Custody Trust Company will operate as a standalone, independently-capitalized business to Coinbase Inc. and will be held to the same compliance, security and capital requirements as traditional fiduciary custodial businesses.
The company has basically gotten into business with different types of customers such as institutions, hedge funds, initial coin offering issuers, and cryptocurrency exchanges for which they will serve as custodial services providers. Coinbase Custody has described itself as a medium that would help secure businesses and provide assistance in financial matters as well.
Other than custody, the services provided by Coinbase Custody also include segregated cold storage, insurance, and audited statements. Moreover, these services are not inexpensive as the minimum balance for the service estimates to be around $1 million. Similar to the functions of Coinbase Custody, the company’s partner, Electronic Transaction Clearing also offers custody, clearing, execution, and settlement services to institutional clients such as broker-dealers, routing firms, trading firms, and hedge funds.
Hence, it is easy for us to assume that the concept of providing custodial services is not only beneficiary in the world of cryptocurrency but is also taken advantage of in other industries as well.