Coinbase has achieved a milestone that is instantly recognizable on Wall Street: it has become the only cryptocurrency platform to offer a full-service prime brokerage. According to John D'Agostino, head of strategy at Coinbase Institutional, the definition of a prime broker is based on a set of familiar criteria, including trading, custody, financing, derivatives, and cross-margining, with staking being an additional layer in the crypto space. 'If you can deliver all those services at scale, you're a prime broker,' he explained.
In traditional markets such as equities and fixed income, only a select few firms, including Goldman Sachs, Morgan Stanley, and Bank of America, qualify as full-service prime brokers. Smaller brokers may support funds but lack the comprehensive suite of services. 'A $100 million hedge fund can't get everything from a top-tier firm, so they have to piece it together,' D'Agostino said. 'The major primes offer everything.' The crypto industry, until recently, operated in a similar manner, albeit with greater fragmentation.
Funds would assemble services from various providers, with custody from one, derivatives from another, and financing from yet another. 'You can artificially replicate a prime broker by combining services, but Coinbase is the only one doing it natively,' D'Agostino said. As the largest U.S.-based cryptocurrency exchange and a significant provider of infrastructure for institutional investors, Coinbase offers trading, custody, and financing services through its Coinbase Institutional unit. The flagship platform, Coinbase Prime, integrates these functions into a single system, enabling hedge funds and asset managers to trade, store, and finance digital assets under one umbrella.
With over $350 billion in assets under custody, representing approximately 12% of the total crypto market capitalization, and serving as custodian for more than 80% of U.S. bitcoin and ether ETF assets, Prime has established itself as a crucial bridge between traditional finance and crypto markets.
Crypto prime brokers provide institutional clients with a bundled suite of services designed to mirror traditional offerings in markets like equities and FX, helping funds manage counterparty risk and access liquidity across fragmented venues. Key players in this space include Coinbase Prime, Galaxy Digital, FalconX, and Anchorage Digital.
The final piece of the puzzle fell into place in March with the introduction of cross-margining between spot and derivatives positions, allowing market makers and institutional traders to reduce capital requirements by as much as 10% to 20%. 'That was the last component,' D'Agostino said. 'Now we're a prime broker by any standard, regardless of the asset class.' Coinbase's institutional platform processes around $236 billion in quarterly trading volume and supports over 470 assets across more than 20 blockchains.
Beyond trading and custody, Coinbase operates a $1 billion lending book and boasts the industry's largest listed derivatives footprint through its Deribit integration. Its staking business spans 10 to 20 tokens at institutional scale, including dedicated products through Coinbase Asset Management. 'Those are the core components,' D'Agostino said.
'There are firms doing well in custody, others in derivatives, and others in lending, but no one is solving all those problems in one place.' This gap has persisted in part due to the relatively small size of the crypto market, which accounts for roughly 3% to 5% of global equities and fixed income markets, making it too small for major banks to fully commit. Instead, D'Agostino expects banks and incumbents to partner with existing players. 'Buy, build, or rent,' he said. 'Banks will rent, as it's cheaper and smarter to rent the best brand rather than build a mediocre version.' In the long term, this calculus could change if crypto grows to 20% or 30% of global markets.
'Then you'll see full-scale competition,' D'Agostino said. 'But that's years away.' For now, the bigger threat isn't Wall Street, it's startups. 'I'm less concerned about JPMorgan than I am about the next Brian Armstrong,' he added.