Coinbase dominates custody for majority of spot ETFs, says Bitwise

If you want to launch a spot crypto ETF in the US, there’s a pretty good chance you’re going to end up calling Coinbase. The exchange serves as custodian for 9 of the 11 spot Bitcoin ETFs and 8 of the 9 spot Ethereum ETFs, a level of market dominance that Bitwise has highlighted as a defining feature of the current ETF landscape.

That translates to roughly 80-84% of all Bitcoin ETF assets sitting under Coinbase’s watch. We’re talking about approximately $74 billion out of a total $91.7 billion in Bitcoin ETF assets under management.

How Coinbase became crypto’s default vault

Coinbase has been custodying crypto assets for institutions for over 12 years. When the SEC finally greenlit spot Bitcoin ETFs in January 2024, issuers needed a custodian they could point to with a straight face. One that had regulatory relationships, insurance frameworks, and battle-tested cold storage infrastructure. Coinbase was the obvious pick for most of them.

BlackRock’s IBIT, the largest spot Bitcoin ETF by assets, routes its BTC and ETH deposits through Coinbase Prime. The world’s biggest asset manager, with over $10 trillion in total AUM across all products, chose the same custodian as nearly every other issuer in the space.

The diversification question

Not every issuer is fully reliant on Coinbase. Fidelity’s FBTC uses Fidelity Digital Assets as its custodian, which makes sense given Fidelity has been quietly building its own crypto infrastructure since 2018. VanEck’s HODL has engaged Gemini alongside Coinbase. BlackRock’s IBIT has also brought Anchorage Digital into the mix.

The vast majority of ETF assets still flow through a single provider. If Coinbase were to experience a significant operational issue, the impact wouldn’t be limited to one ETF. It would potentially affect 9 of the 11 Bitcoin ETFs simultaneously. Buying multiple Bitcoin ETFs from different issuers wouldn’t actually diversify your custodial exposure in most cases.

The competitive landscape for crypto custody is slowly expanding. Anchorage Digital holds a federal bank charter. Fidelity Digital Assets has the backing of one of the largest financial services firms on the planet. But winning ETF custody mandates requires years of operational history, and most competitors are still building that track record.

For Coinbase, the dominance generates substantial revenue and cements the company’s position as critical infrastructure for the US crypto market. Coinbase Custody likely charges basis points on assets under custody, and at $74 billion-plus, even a modest fee rate generates meaningful income. On the other side, being the single point of failure for most of the US spot crypto ETF market invites regulatory scrutiny. Adding “systemically important crypto custodian” to its regulatory profile could accelerate conversations about enhanced oversight requirements, capital reserves, or even designation as a systemically important financial market utility.

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