Coinbase has achieved a milestone that is instantly recognizable on Wall Street: it has become the only full-service prime broker in the cryptocurrency industry. According to John D'Agostino, the head of strategy at Coinbase Institutional, the definition of a prime broker is based on a specific set of criteria, including trading, custody, financing, derivatives, and cross-margining, with staking being an additional component in the crypto space.
D'Agostino stated that if a company can provide all these services at scale, it can be considered a prime broker. In traditional markets, such as equities and fixed income, only a handful of firms, including Goldman Sachs, Morgan Stanley, and Bank of America, meet the criteria for full-service prime brokers. Smaller brokers may provide support to funds, but they do not offer the full range of services. In the crypto industry, the landscape was previously fragmented, with funds having to piece together services from multiple providers.
However, Coinbase is now the only company that natively offers all these services. As the largest U.S.-based cryptocurrency exchange, Coinbase provides infrastructure for institutional investors through its Coinbase Institutional unit, offering trading, custody, and financing services. The company's flagship platform, Coinbase Prime, combines these functions into a single system, enabling hedge funds and asset managers to trade, store, and finance digital assets under one roof.
With over $350 billion in assets under custody, Coinbase Prime holds approximately 12% of the total crypto market capitalization and serves as custodian for more than 80% of U.S. bitcoin and ether ETF assets.
The firm has become a key bridge between traditional finance and crypto markets, operating under a growing regulatory framework. The rollout of cross-margining between spot and derivatives positions in March marked the final piece of the puzzle, allowing market makers and institutional traders to reduce capital requirements by 10% to 20%. Coinbase's institutional platform processes around $236 billion in quarterly trading volume and supports over 470 assets across more than 20 blockchains.
In addition to trading and custody, Coinbase has a $1 billion lending book and 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.
While other firms may excel in specific areas, such as custody or derivatives, no one else is solving all these problems in one place. This gap persists due to the relatively small size of the crypto market, which is around 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 companies like Coinbase, as it is more cost-effective and smarter to 'rent' the best brand rather than building a subpar version. In the long term, if crypto grows to 20% or 30% of global markets, full-scale competition may emerge. However, for now, the bigger threat to Coinbase comes from startups rather than traditional financial institutions.