Coinbase has reached a milestone that is instantly recognizable on Wall Street: it has become the only full-service prime broker 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 is still based on a familiar checklist from Wall Street, which includes trading, custody, financing, derivatives, and cross-margining, with an additional layer of staking in the crypto space.
'If you can provide all of these services at scale, then you qualify as a prime broker,' he stated. 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 brokers, according to D'Agostino. Smaller brokers may be able to support funds, but they do not offer the full range of services.
'A hedge fund with $100 million in assets is not getting everything it needs from a top-tier firm; instead, it is piecing together services from various providers,' he explained. 'The major prime brokers, on the other hand, offer the complete package.' The cryptocurrency market, until recently, operated in a similar manner, albeit with greater fragmentation.
Funds had to assemble custody services from one provider, derivatives from another, and financing from yet another source. 'You can replicate the services of a prime broker by patching together various services, but Coinbase is the only one that provides 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 company's 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.
Coinbase Prime holds over $350 billion in assets under custody, which is approximately 12% of the total cryptocurrency market capitalization, and serves as the custodian for more than 80% of U.S. bitcoin and ether exchange-traded fund assets.
The firm has become a crucial bridge between traditional finance and cryptocurrency markets, serving as the custodian for a significant portion of U.S. bitcoin and ether exchange-traded fund assets and operating under an expanding regulatory framework, including oversight from New York regulators.
Crypto prime brokers provide institutional clients with a suite of services that mirror traditional offerings in markets such as equities and foreign exchange, 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 their capital requirements by as much as 10% to 20%.
'That was the last component we needed to become a full-service prime broker,' D'Agostino said. 'Now, we meet the definition of a prime broker by any standard, regardless of the asset class.' The institutional platform of Coinbase processes approximately $236 billion in quarterly trading volume and supports more than 470 assets across over 20 blockchains. In addition to trading and custody services, Coinbase operates a $1 billion lending book and has the largest listed derivatives footprint in the industry through its integration with Deribit. The company's staking business spans 10 to 20 tokens at an institutional scale, including dedicated products offered through Coinbase Asset Management.
'Those are the core components of a prime broker,' D'Agostino said. 'There are firms that excel in custody, others in derivatives, and others in lending, but no one else is providing all of these services in one place.' This gap in the market has persisted in part due to the relatively small size of the cryptocurrency market, which accounts for only 3% to 5% of the global equities and fixed income markets, making it too small for major banks to fully commit to. Instead, D'Agostino expects banks and established players to form partnerships. 'The options are to buy, build, or rent,' he said.
'Banks will likely choose to rent, as it is cheaper and more strategic to partner with the best brand rather than building a mediocre version.' In the long term, this calculus could change if the cryptocurrency market grows to 20% or 30% of the global market, at which point 'you will see full-scale competition,' D'Agostino said. 'However, that is still years away.' For now, the greater threat to Coinbase does not come from Wall Street, but rather from startups.
'I am less concerned about JPMorgan than I am about the next Brian Armstrong,' he added.