The crypto firm Coinbase made yet another pioneering move in the regulatory morass that is cryptocurrency. On the 23rd of October, the company announced that its institutional wing, Coinbase Custody Trust Company, received approval from the New York State regulators to operate as an independent Qualified Custodian.
Coinbase to operate as Qualified Custodian
A qualified custodian actually operates similarly to a bank, so much so that it is sometimes referred to as custodian bank, in that it is authorized to hold money for other people. Generally, the purpose of a custodian is to minimize theft and loss of funds. Coinbase is actually among the first crypto firms to achieve this status, with BitGo having recently received approval from the South Dakota Division of Banking in order to operate as a qualified custodian too.
Coinbase Custody Trust Company is legally a separate company from Coinbase. This actually means that its funds and accounts are going to be organized separately from existing capital and funds which are held by Coinbase.
This move does not affect everyday users of Coinbase products, even though some larger holders may find that they have some new options and products which are available to them in the months that come. It still remains to be seen if Coinbase is going to seek approval from some other jurisdictions, like the EU, for some similar licensing. As the New York Department of Financial Services announces, the firm is legally authorized to protect crypto assets.
Most of the clients use Coinbase to be sure they are legally transacting
As Coinbase states, this is a significant addition for their clients, the vast majority of who use the firm in order to be sure that they are legally transacting in the crypto space.
On their blog, the company wrote that for their customers, operating under a New York State Trust Company is actually more than just a new license – it is an important piece of regulatory clarity which is going to permit them to compliantly store more assets, as well as add new features like staking.
Here, the keyword is compliance. While a lot of in the Bitcoin community still have problems with the ‘Bitcoin bank’ business model or the influx of traditional financial operators into the cryptocurrency space, a lot of newer converts and people that are interested in cryptocurrency have a much greater fear of government reprisal for the unregulated use of cryptos. This move also adds a degree of accountability to Coinbase regarding holding some greater deal of currency – with the new services which they can offer larger clients they also now have a new range of penalties, as well as investigative angles they are open to.
Cryptos are no longer a fringe asset
Not so long ago, to invest in Bitcoin has been widely considered either foolhardy overly idealistic, or downright outlandish. However, today, no significant financial firm or entity has not taken note of the plane-shifting asset class. The majority of them have some active plans in place to deal with the new reality: blockchains are here to stay, and tokens which power them are mighty valuable. Some folks like veteran banker Jamie Dimon may actually continue to disparage cryptocurrencies while quietly strategizing to profit from them. However, the smart money of today knows better than to believe his epithets.
Since its inception, Coinbase understood what cypherpunks might prefer to minimize or ignore: Bitcoin and some other cryptocurrencies have the best chance of survival when the governments don’t actively have them in their crosshairs. The establishment, as well as the licensure of Coinbase Custody, is only the latest move of the company in line with this philosophical realism.