Crypto exchange Kraken is reportedly considering to enter the crypto ETF custody race, amid spot Ethereum ETF’s most anticipated approval.
According to a scoop by Fox Journalist Eleanor Terrett, the US’s second largest crypto exchange Kraken “is hoping to get into the crypto ETF custody game, looking to follow Coinbase.”
SCOOP: The U.S’s second largest #crypto exchange @krakenfx is hoping to get into the #cryptoETF custody game, looking to follow @coinbase which acts as a coin custodian for 8 of the 11 $BTC Spot ETFs.
— Eleanor Terrett (@EleanorTerrett) February 12, 2024
Coinbase, run by CEO Brian Armstrong, is currently dominating the custody service for nine of the 12 proposed Bitcoin ETFs in the US. These custodians hold onto assets on behalf of someone else. In this case, it means safekeeping the Bitcoin that ETFs will own, keeping hackers and any other bad actors at bay.
“I think Coinbase is the obvious solution on the custodian side and it makes sense that they’re the most common,” Bloomberg Intelligence ETF analyst James Seyffart said. “But there are some others.”
Inspired by Coinbase’s custodial roles for most of the recently approved spot Bitcoin ETFs, Kraken is reportedly eying to secure custody of the most-anticipated spot Ethereum ETFs.
Kraken’s CEO David Ripley said in January that the exchange is set to launch a new custody product this quarter. Speaking at a Bloomberg television interview, he said that the move, “will be a big event for us.”
“For a lot of customers, there’s often synergy between the two – custody in the same place where you find liquidity.”
Kraken’s Foray into Crypto ETF Custodianship Market
As the market anticipates regulatory green light for Spot Ethereum ETFs, Kraken’s plans to step into the crypto ETF custodian race marks a new milestone in the democratization of cryptocurrency investments.
Also, the custody rates range from 10 basis points for the largest clients to 50 basis points for smaller ones. Per industry officials, these rates also differ depending on whether the customers use any other services such as trading.
“The ETFs will compete on price, and one of the key inputs to the price is the cost of custody platforms as well as spread in trading,” Gavin Michael, CEO of Bakkt Holdings, noted.
Crypto trading and custody service Bakkt is also in talks with several Bitcoin ETF managers, Michael said early this month. Additionally, BitGo is also having talks with Bitcoin ETF issuers, according to the firm’s head of brokerage, Adam Sporn.
Kraken announced last year that it would launch a new crypto bank for customers in the US initially. Per the exchange’s claims, the ‘Kraken Bank’ looks into products like deposit accounts in USD and crypto assets, multiple funding and payments options, institutional custody products, among others.
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