Coinbase has reached a milestone that is instantly recognizable on Wall Street: it has become the only full-service prime brokerage in the cryptocurrency sector, according to its own definition. John D'Agostino, the head of strategy at Coinbase Institutional, noted that the definition of a prime broker remains consistent with traditional Wall Street standards, encompassing trading, custody, financing, derivatives, and cross-margining, with the added element of staking in the crypto space.
'If you can provide all of these services at scale, you qualify as a prime,' he explained. In the equities and fixed-income markets, only a select few firms, including Goldman Sachs, Morgan Stanley, and Bank of America, truly meet the criteria for full-service prime brokerages, D'Agostino observed.
Smaller brokers may support funds but lack the comprehensive range of services. 'A $100 million hedge fund isn't receiving the full suite of services from a top-tier firm; instead, they're piecing it together,' he said. 'The major primes offer everything.' The cryptocurrency market, until recently, operated similarly, albeit with greater fragmentation.
Funds combined custody services from one provider, derivatives from another, and financing from yet another. 'You can replicate a prime broker by aggregating services, but Coinbase is the only one providing all of these services 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.
Prime holds over $350 billion in assets under custody, representing 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 crucial bridge between traditional finance and crypto markets, serving as custodian for a substantial share of U.S.
bitcoin and ether ETF assets and operating under an expanding regulatory framework, including oversight from New York regulators. Crypto prime brokers offer institutional clients a bundled suite of services designed to mirror traditional offerings in markets like equities and foreign exchange. They assist funds in managing counterparty risk and accessing liquidity across fragmented venues. Prominent players in this space include Coinbase Prime, Galaxy Digital, FalconX, and Anchorage Digital.
The final component 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 pillar,' D'Agostino said. 'Now we meet the definition of a prime by any standard, substituting crypto for any asset class.' Coinbase's institutional platform processes roughly $236 billion in quarterly trading volume and supports more than 470 assets across 20-plus blockchains.
Beyond trading and custody, Coinbase operates a $1 billion lending book and what D'Agostino describes as 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,' he said. 'There are firms excelling in custody, others in derivatives, and others in lending. No one is addressing all of these issues in a single location.' This gap has persisted partly due to crypto's relatively small size.
At roughly 3% to 5% of global equities and fixed-income markets, it remains too small for major banks to fully commit. D'Agostino anticipates that banks and incumbents will instead opt to partner. 'Buy, build, or rent,' he said.
'Banks will choose to rent, as it is 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 greater threat isn't Wall Street; it's startups. 'I'm less concerned about JPMorgan than I am about the next Brian Armstrong,' he added.