Coinbase has subtly achieved a milestone that is instantly recognizable on Wall Street: it has become the only full-service prime brokerage in the crypto sector, as defined by the company itself. John D'Agostino, the head of strategy at Coinbase Institutional, explained that the definition of a prime broker is still based on a familiar checklist used in Wall Street: trading, custody, financing, derivatives, and cross-margining, with the added layer of staking in the crypto space.
'If you can perform all of these functions at scale, you're considered a prime,' he stated. In the equities and fixed-income markets, only a select few firms, such as Goldman Sachs, Morgan Stanley, and Bank of America, truly qualify as full-service primes, according to D'Agostino.
Smaller brokers may support funds but lack the comprehensive range of services. 'A $100 million hedge fund isn't receiving all services from a top-tier firm; instead, they're piecing together services from various providers,' he said.
'The major primes offer everything.' The crypto sector, until recently, functioned similarly, albeit with greater fragmentation. Funds would combine custody services from one provider, derivatives from another, and financing from elsewhere. 'You can synthetically recreate a prime broker by combining services from different providers,' D'Agostino said.
'However, Coinbase is the only firm that natively offers all of these services.' 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, accounting for approximately 12% of the total crypto market capitalization, and serves as the 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 the 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 provide institutional clients with 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 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 pillar,' D'Agostino said. 'Now we're a prime broker by any standard, with crypto substituting for any asset class.' The institutional platform of Coinbase 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 an institutional scale, including dedicated products through Coinbase Asset Management. 'Those are the core components,' he said.
'There are firms performing well in custody, others in derivatives, and others in lending. However, no one is solving all of these 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. D'Agostino instead expects banks and incumbents to form partnerships. 'Buy, build, or rent,' he said.
'Banks will opt to rent, as it's more cost-effective and smarter to rent the best brand rather than building 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.