Coinbase at the heart of Bitcoin ETFs: a risk of centralization?

Crypto exchange Coinbase is currently the focus of the Bitcoin ETF. Trading of the first Bitcoin ETFs began last week when the SEC finally approved several applications. This has placed Coinbase at the center of the brokered funds rollout. In addition to creating envy among the industry, Coinbase’s dominance poses certain risks.

Coinbase is the #1 Bitcoin ETF Custodian Choice

The US SEC has finally approved Bitcoin ETF issuance applications from nearly a dozen investment companies. They include heavyweights such as BlackRock and Franklin Templeton. The majority of these issuers will depend on Coinbase for the operation of their ETFs. This is because the crypto exchange will need to provide custody, trading and lending services to many companies.

Bloomberg News showed that the Most Bitcoin ETF Issuers Choose Coinbase as depositary. These include Bitwise Bitcoin ETF, Grayscale Bitcoin Trust, Wisdom Tree Bitcoin Fund and iShares Bitcoin Trust. The approval of Bitcoin ETFs is the result of years of industry effort. Efforts which are hailed as a decisive event which will promote the adoption of Bitcoin, the largest crypto in the world.

The risks of Coinbase domination

If Coinbase’s privileged position arouses the desire of its competitors, others do not see it very favorably. Indeed, some issuers estimate the possibility that the company will have to reduce certain services that the crypto exchange provides. According to Dave Abner, there is a concentration risk due to the large number of companies using the exchange as a crypto custodian.

Alesia Haas, financial director of Coinbase, however, tried to reassure. She said the company was working diligently to avoid conflicts of interest. Another spokesperson added that the crypto exchange’s custody business is not at issue in the company’s case with the SEC. Moreover, several companies have chosen this exchange since they consider it the most advantageous. For Bitwise, the reason for its choice is that Coinbase is the largest and most established.

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