As the cryptocurrency market continues to mature, the role of custody services has become increasingly critical for exchanges looking to attract and retain institutional clients. A prime example of this is Coinbase, whose strategic focus on custody has driven remarkable growth and positioned it as a leader in the industry. In this blog post, we explore “The Custody Playbook” that Coinbase used to transform its business and why your exchange should consider implementing a similar solution.
The Rise of Coinbase Custody
In 2018, Coinbase recognized a significant gap in the market: the need for secure, institutional-grade custody services. With institutional investors and high-net-worth individuals beginning to enter the crypto space, the demand for a trusted custody solution was clear. In response, Coinbase launched Coinbase Custody, setting the stage for what would become one of the most successful initiatives in the company’s history.
Unprecedented Growth in Assets Under Management
The results of Coinbase’s focus on custody services have been nothing short of extraordinary. In just a few years, Coinbase Custody’s assets under management (AUM) skyrocketed from $1 billion at launch to over $223 billion by the end of 2021. This remarkable growth, driven by what can be seen as a well-executed “Vault Strategy,” underscores the trust that institutional clients have placed in Coinbase’s secure and compliant custody solution and represents a staggering 1492% growth year-over-year.
Even as the broader cryptocurrency market experienced volatility in 2022, Coinbase Custody remained resilient, ending 2023 with $175 billion in AUM. This resilience highlights the critical role that custody services play in not only attracting but also retaining assets, even during challenging market conditions.
Why Custody Services Are Essential for Your Exchange
The success of Coinbase Custody offers valuable insights for other exchanges. By integrating custody services into your platform, you can:
- Attract Institutional Clients: Secure custody solutions are a key factor for institutional investors when choosing an exchange. By offering a trusted custody service, you can position your exchange as a preferred partner for these high-value clients.
- Increase Assets Under Management: As demonstrated by Coinbase’s “Vault Strategy,” custody services can drive significant growth in AUM, providing a stable and lucrative revenue stream for your business.
- Enhance Market Resilience: Custody services help protect client assets during periods of market volatility, ensuring that your exchange remains a trusted platform even in uncertain times.
The Opportunity Ahead with Scalable Solutions
As the demand for institutional-grade custody solutions continues to rise, now is the time for exchanges to invest in this critical service. By implementing a robust custody solution, you can position your exchange for long-term success, attract a broader client base, and secure your place as a leader in the evolving cryptocurrency market.
At Scalable Solutions, we offer cutting-edge custody technology that is designed to meet the highest standards of security, compliance, and client control. Our solution provides several key advantages:
- Fully On-Prem Setup: Our custody solution is entirely on-premises, allowing your clients to maintain full control over their assets. With no sharing of keys with third parties, your clients can ensure the highest level of security and privacy.
- Unmatched Blockchain Coverage: We support over 1,500 assets in our custody solution, offering the most comprehensive blockchain coverage available in the market today. This extensive support enables your exchange to cater to a wide range of client needs.
- Advanced Policy Engine: Our custody solution includes an advanced policy engine that is fully controlled and managed by your clients. This allows for complete customization and enforcement of security policies, such as whitelisting addresses, setting daily and monthly limits, asset-specific restrictions, and gas fee limits. Every transaction is meticulously checked against these policies to ensure compliance and security.
If you’re ready to elevate your exchange with a state-of-the-art custody solution, contact us at Scalable Solutions today. We’re here to help you implement your own “Custody Playbook” and position your exchange for future growth.