Kraken Unleashes Institutional Service To Outcompete Coinbase

February 28, 2024

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Kraken, a prominent player in the cryptocurrency exchange scene has announced its plans to enter the institutional market for Bitcoin custody services. This will directly position it to challenge the dominance of Coinbase in this space.

The news of the planned launch was revealed by the company as it stated that Kraken aims to provide an alternative to Coinbase’s stronghold on custodial services for spot Bitcoin exchange-traded funds (ETFs). In November 2023, Kraken indicated interest to follow in Coinbase’ footsteps with Layer-2 Launch and solve new challenges in the industry.

Kraken Seeking Slice of Institutional Bitcoin Custody Market

Coinbase currently serves as the custodian for approximately 90% of the $36 billion in Bitcoin ETF assets, catering to eight out of the 11 spot Bitcoin ETF issuers approved by the Securities and Exchange Commission (SEC).

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This concentration of custodial services poses potential overconcentration risks, prompting Kraken to enter the fray with its institutional service offering. Kraken hopes to rival the services of Coinbase and grab a bite of the market share demands of institutional investors.

Tim Ogilvie, Kraken’s Head of Institutional, highlighted the growing institutional interest in cryptocurrencies, particularly following the recent approval of Bitcoin ETFs. He stressed on the rapid growth of institutional adoption in the crypto space and acknowledged the need for diversified custodial solutions to meet the evolving demands of institutional investors.

Kraken’s Strategy

Kraken’s institutional service launch aims to capitalize on the increasing institutional demand for secure and reliable custody solutions tailored to digital assets. While Coinbase currently enjoys dominance in the institutional custody market, Kraken seeks to attract new institutional clients who are exploring alternative custodial options.

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Despite Coinbase’s established market presence, Kraken remains confident in its ability to appeal to a fresh wave of institutional customers. The company’s strategy will revolve around offering innovative products and services designed to address the unique requirements of institutional investors entering the cryptocurrency market.

Innovating to Attract Institutional Investors

This move by Kraken signifies a broader trend of intensifying competition within the cryptocurrency industry, with companies vying to differentiate themselves and capture market share in various segments. As the market matures, competition fosters innovation, driving the development of diverse custodial solutions and other offerings to cater to the evolving needs of both institutional and retail investors.

Kraken had earlier this month obtained Virtual Asset Service Provider (VASP) registration from the Dutch Central Bank (DNB) in its bid to onboard customers, facilitate fiat-to-crypto transactions, and offer a wider range of services to its European user base.