Does Coinbase’s Deal with Blackrock show that it Rules the Prime Broking Roost?

Coinbase’s deal with BlackRock shows institutional confidence

Coinbase has signed a deal with Blackrock which will enable greater support for institutional investors.  This means that they could become the conduit for huge increases of volume in Bitcoin and leading alt coins as HNWIs and larger corporations decide that they want to enter the crypto space. Coinbase’s deal with BlackRock is not just a small-scale partnership; it opens the doors to institutions to begin accumulating Bitcoin without constraints.

Coinbase is the largest exchange in the US, and has approximately 100 million users worldwide. It is also one of the oldest crypto exchanges and by far one of the most recognisable. Blackrock is the perfect ally for them, since Blackrock is the largest asset manager in the world – there is no company that could possibly provide Coinbase with more liquidity.

Already, Coinbase have their Coinbase Prime offering, which offers a range of tailored services to over 13,000 institutional clients. The partnership with Blackrock will allow them to increase this offering by orders of magnitude over the coming years.

Strong leadership at Coinbase

Recently, Coinbase’s CEO Brian Armstrong went on the Lex Fridman podcast to discuss some of the challenges of running the company, and his views on the industry as a whole. He explained how excited he was about Coinbase and how important it to was to him.

When it came to the challenges of running the company, Fridman asked Armstrong about Coinbase’s alleged “anti-woke” stance. Armstrong explained that, particularly in the US, there is a culture of people who wish to overly-politicise their place of work, and that this made it more difficult for them to execute tasks successfully.

Coinbase decided to take the action of offering all employees the option to leave with a fair severance package if they were not on board with the Coinbase mission, or wanted to push Coinbase in a political direction.

Five percent of employees accepted the offer, and Armstrong now claims that he has realigned the company.  He notes that this was not a problem in any way at all for workers outside the US, who are not falling prey to such a significant decline in work ethic.

Binance challenging Coinbase

Coinbase’s role as market-leading exchange is not without competition. Under the leadership of CZ, Binance and the BNB token have performed exceptionally well in the last few years – BNB has been one of the best-performing assets since launching in 2017, and now processes more daily volume than Coinbase.

One of the main advantages that Binance has over Coinbase (other than that, according to Armstrong, work ethic in the US is far worse than in other countries) is that they have their own coin.  Binance Coin (BNB) initially started with limited use cases, and entitled holders to reduced trading fees on the platform.

However, as the popularity of the exchange grew and the battles between layer one blockchains grew, Binance spotted an opportunity to offer exponentially more services to their clients, and at the same time to concentrate their bets on an evermore decentralised future.

The future of exchanges

Coinbase and Binance have both been involved in small-scale skirmishes with the SEC, as well as a variety of other regulators around the world.  Thus far, it appears that they are being limited by the fact that they are legally required to conduct KYC and AML procedures, and are restricted from offering a lot of services like yield, since the SEC classes these offerings as a security.

Chanpengeng Zhao, the CEO of Binance, has made the case that believes decentralised exchanges will be far larger than centralised exchanges in the future. The reason for this is that they can attract far more liquidity, since they aren’t subject to the aforementioned restrictions.

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