Coinbase has reached a milestone that is readily 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 is 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 context of cryptocurrency. He stated, 'If you can perform all these functions at scale, you qualify as a prime broker.' In the equities and fixed income markets, only a select few firms, such as Goldman Sachs, Morgan Stanley, and Bank of America, genuinely fit the criteria of full-service primes.
Smaller brokers may support funds but lack the comprehensive range of services. D’Agostino explained, 'A $100 million hedge fund doesn’t receive everything from the top tier; they have to piece it together.' The big primes, however, offer the full spectrum of services.
The cryptocurrency market operated similarly until recently, albeit in a more fragmented manner. Funds had to assemble services from various providers, including custody from one, derivatives from another, and financing from elsewhere. D’Agostino pointed out, 'You can synthetically replicate a prime broker by combining services, but Coinbase is the only one that does all of it natively.' 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 roof. Prime holds over $350 billion in assets under custody, accounting for approximately 12% of the total cryptocurrency 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 cryptocurrency markets, acting as a custodian for a substantial portion 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 such as 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%. D’Agostino stated, 'That was the last pillar; now we meet the standards of a prime broker by any definition, regardless of the asset class.' The institutional platform of Coinbase processes approximately $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 what D’Agostino describes as the industry’s largest listed derivatives footprint through its integration with Deribit.
Its staking business spans 10 to 20 tokens at an institutional scale, including dedicated products through Coinbase Asset Management. D’Agostino noted, 'Those are the core components; there are firms that excel in custody, others in derivatives, and others in lending. However, no one is addressing all these issues in a single place.' This gap has persisted partly due to the relative size of the cryptocurrency market.
At roughly 3% to 5% of the global equities and fixed income markets, it remains too small for major banks to fully commit. D’Agostino expects banks and established players to form partnerships instead. 'Buy, build, or rent,' he said.
'Banks will opt to rent; it is more cost-effective and smarter to rent the best brand rather than build an average version.' In the long term, this calculation could change if the cryptocurrency market grows to 20% or 30% of global markets. 'Then you will see full-scale competition,' D’Agostino said. 'But that is years away.' For now, the greater threat is not from Wall Street but from startups. 'I am less concerned about JPMorgan than I am about the next Brian Armstrong,' he added.