Institutional investors have deposited over $1bn (£770m) with cryptocurrency exchange Coinbase, according to its CEO.
Brian Armstrong told the Consensus conference in New York on Wednesday: “For Coinbase custody, we launched the product about 12 months ago. We just crossed $1bn AuM [assets under management]. We have 70 institutions adding $150m AuM a month. To a large degree that’s been a success.”
Coinbase is a cryptocurrency exchange and wallet company that was headquartered in San Francisco and launched in 2012. It is one of the world’s leading cryptocurrency businesses, with revenues of $1bn last year.
Coinbase mainly caters to retail investors — ordinary individuals who want to buy and sell crypto — but it launched Coinbase Custody in July last year to cater to financial institutions that want to invest in crypto such as banks, hedge funds, family offices, and asset managers.
“I think that space will keep growing really rapidly,” Armstrong, who co-founded Coinbase, said on Wednesday. “Every institution is going to have a crypto part of the business in the next few years if they don’t already.”
News Coinbase’s institutional business has attracted $1bn comes amid a revival in the price of bitcoin, which has rallied over 100% since the start of the year. One of the theories for the rally is interest from institutional investors. Armstrong said bitcoin is the most popular crypto among institutional clients.
Venture capitalist Fred Wilson, who is an investor in Coinbase, appeared alongside Armstrong at Consensus. He said that while institutional interest in crypto was growing, it was not the kind that many market observers expected.
“When people read in the Wall Street Journal that institutions are coming to crypto, what they think is BlackRock’s coming to crypto, Goldman’s coming to crypto,” Wilson said. “Actually, that’s not what has happened.”
Wilson, who runs Union Square Ventures, said the “first two big buckets of institutional money” were specialised cryptocurrency funds and venture capitalists who received crypto tokens in return for their investments and needed somewhere to store them.
Armstrong said it “still feels like we’re in the early days” of cryptocurrency, but predicted that it would continue to grow more mainstream.
“When television first came out it was this grainy image in black and white, and the audio barely worked,” Armstrong said. “People were saying why would I use that, I can get all my information from the radio? Same thing with electric cars, the early ones looked like toys.
“That’s what we’re seeing with crypto, right? What you typically see in these markets is certain niche areas adopt it and it eventually becomes more and more mainstream.”
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.