Coinbase, huge US crypto exchange and wallet, was reported to have secured a huge $20 billion hedge fund for the custody service, according to Business Insider. This can turn out to be problematic for the industry giant.
On July 2, Coinbase officially launched their Coinbase Custody program. This is practically a digital assets custodian option aimed for larger institutional investors. The service is highly secured through the efforts of ETC (Electronic Transaction Clearing), independent broker, which operates with full SEC (US Securities and Exchange Commission) clearance.
The name of the secured $20 billion hedge fund was not disclosed. However, insiders did confirm it and added that Coinbase is also looking for partnerships with various other larger hedge funds. The idea is that Coinbase tries to offer a margin financing option. This could be reality by the end of 2018. If it happens, institutional investors are going to be able to borrow money in order to trade through Coinbase.
The one problem that might appear is that the SEC might start to look closer at what Coinbase is doing because of this. According to Cornell University law professor, Robert Hockett, for Business Insider:
This raises conflict concerns, given Coinbase’s also running a coin exchange, reminiscent of those that the Commission has found when securities firms have attempted to combine these two roles.
A short time ago Coinbase declared that it did obtain permission from SEC to list the tokens that are considered as securities, for trading purposes. This statement was retracted. Coinbase did acknowledge that there is no FINRA or SEC approval for the acquisition of securities dealer.
While it is clear that Coinbase is moving towards some really big expansions, some problems might appear because of the fact that tokens are involved and whenever we see hedge funds becoming partnerships, authorities start to look closer at what is happening. Crypto technology is not seen as something highly secure and various problems can appear. Also, Coinbase seems to be shadier and shadier in the decisions that it takes.
