Cryptocurrency exchange Coinbase is reinforcing its global presence in the Bitcoin exchange-traded fund (ETF) market by becoming a custody partner for a new Bitcoin ETF in Australia. The DigitalX Bitcoin ETF (BTXX), launched by Australia’s DigitalX, has selected Coinbase as its official custody provider.
Coinbase’s Expanding Role in Bitcoin ETFs
On July 29, Coinbase announced its partnership with DigitalX, detailing that it will offer custody and “advanced trading execution services” for the BTXX through its institutional-grade exchange platform, Coinbase Prime. This platform is designed to offer “sophisticated storage solutions” for institutions and individuals managing substantial crypto assets.
Launched on July 12, the DigitalX Bitcoin ETF aims to closely track the performance of Bitcoin by maintaining long-term holdings of BTC. The ETF received approval to be listed on the Australian Securities Exchange (ASX) on July 9, marking a significant milestone in the Australian market.
Features of the DigitalX Bitcoin ETF (BTXX)
- Fund Objective: The ETF is designed to be a passive holder of Bitcoin, only buying or selling BTC to facilitate redemptions and creation of Bitcoin interests.
- Custody Provider: Coinbase has been chosen to provide custody services, leveraging its advanced institutional-grade solutions.
- Launch Date: July 12, 2024.
- Listing Approval: Approved on the ASX on July 9, 2024.
Coinbase’s Dominance in the Bitcoin ETF Infrastructure
Coinbase has established itself as a major player in the Bitcoin ETF landscape. Since receiving approval in the United States in January, the exchange has become a custody provider for ten spot Bitcoin ETFs and eight of the nine newly approved Ether ETFs. Notable ETFs such as the Grayscale Bitcoin Trust ETF (GBTC) and BlackRock’s iShares Bitcoin Trust (IBIT) also rely on Coinbase for Bitcoin custody services.
- Experience: Over 12 years in digital asset safekeeping.
- Institutional-Grade Solutions: Coinbase Prime offers secure storage and advanced trading execution.
- Commitment: Coinbase emphasizes its role as a secure, user-friendly bridge to the crypto economy.
Despite Coinbase’s robust track record, some industry executives have raised concerns about the potential risks associated with its dominance in both retail and Bitcoin ETF markets. These concerns include the risks of hacking and state intervention. However, there are mechanisms in place to ensure continued access to the ETF’s underlying funds, even in the unlikely event of Coinbase’s bankruptcy.
Australia has seen a growing interest in Bitcoin ETFs, significantly impacting the local market. The Australian Securities Exchange (ASX) debuted its first spot Bitcoin ETF, the VanEck Bitcoin ETF (VBTC), on June 20, 2024. This ETF allows Australian investors to gain exposure to BTC through VanEck’s US counterpart, structured as a feeder fund investing in VanEck’s Bitcoin Trust (HODL), listed on the Chicago Board Options Exchange (CBOE).
Interestingly, while VanEck has chosen Gemini, founded by the Winklevoss twins, as its custodian, DigitalX has opted for Coinbase. This choice reflects the diverse approaches in the custody space within the Bitcoin ETF sector.
| ETF Name | Launch Date | Custodian | Key Features |
|---|---|---|---|
| DigitalX Bitcoin ETF | July 12, 2024 | Coinbase | Passive Bitcoin holder, ASX listed |
| VanEck Bitcoin ETF | June 20, 2024 | Gemini | Feeder fund, exposure via US Bitcoin Trust |
Coinbase’s role as the custody provider for DigitalX’s Bitcoin ETF highlights its expanding influence in the global Bitcoin ETF market. With its institutional-grade custody solutions, Coinbase continues to play a pivotal role in facilitating the secure and efficient management of digital assets. The debut of DigitalX’s Bitcoin ETF marks a significant addition to the Australian market, following the introduction of VanEck’s ETF.
