Coinbase has achieved a milestone that echoes a familiar standard 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, a prime broker is defined by its ability to provide trading, custody, financing, derivatives, and cross-margining services. In the crypto space, this definition also encompasses staking.
'If you can offer all these services at scale, you're a prime broker,' he explained. In traditional markets like 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 piece together services from various providers,' D'Agostino noted. 'The large prime brokers offer the full range of services.' The cryptocurrency market had been fragmented in a similar way, with funds combining custody from one provider, derivatives from another, and financing from yet another. 'You can create a synthetic prime broker by combining services, but Coinbase is the only one that offers all these services natively,' D'Agostino said.
As the largest U.S.-based cryptocurrency exchange and a major 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 roof. 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 become a key player in the industry.
The firm has established itself as a bridge between traditional finance and crypto markets, serving as custodian for a significant share of U.S. bitcoin and ether ETF assets and operating under a growing regulatory framework.
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. Prominent 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 10% to 20%. 'That was the last component we needed to become a full-service prime broker,' D'Agostino said.
'Now, we meet the standards of a prime broker in any asset class, with crypto being no exception.' The institutional platform of Coinbase 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 has the largest listed derivatives footprint in the industry through its integration with Deribit. Its staking business spans 10 to 20 tokens at an institutional scale, including dedicated products through Coinbase Asset Management.
'Those are the core components of a prime broker,' D'Agostino explained. 'While there are firms that excel in custody, derivatives, or lending, no one else offers all these services in one place.' This gap in the market has persisted partly due to the relatively small size of the crypto industry, which accounts for only 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. 'They can either buy, build, or rent these services,' he said. 'It's more cost-effective and smarter for banks to rent the best services rather than building their own.' However, if the crypto market grows to 20% or 30% of global markets, the dynamics could change, and full-scale competition could emerge. 'But that's years away,' D'Agostino noted.
For now, the bigger threat to Coinbase comes from startups rather than traditional financial institutions. 'I'm less concerned about JPMorgan than I am about the next Brian Armstrong,' he added.