Many of you recently saw the news that BlackRock and Coinbase have entered into an agreement to support institutional investment in digital assets and allow them to do so using the Coinbase platform. A few folks have asked me whether this potentially hurts Onramp and its mission to be the next-generation platform for digital asset wealth management.
First, let’s look at the specifics of the partnership. On August 4th, it was announced that Coinbase had partnered with BlackRock to offer institutional users of BlackRock’s Aladdin platform, access to crypto through Coinbase Prime. Aladdin users will have access to Coinbase’s trading, custody, prime brokerage, and reporting. Initial access will be limited to Bitcoin, but it will allow users to track their Bitcoin exposures directly within their existing portfolio management tools and workflows.
In general, we feel this is great news for the overall digital asset space. BlackRock is a major force in the financial world and to see them work with Coinbase to integrate more cryptocurrency support is a great vote of support for expanded institutional investment into the asset class.
It also should have no negative impact on market potential for platforms like Onramp. The BlackRock/Aladdin/Coinbase deal is for institutional accounts, not retail. This is analogous to Fidelity’s Institutional Digital Asset Custody offering. It is for institutions with omnibus accounts eg. hedge funds, mutual funds, banks, broker-dealers, family offices, etc. Most RIAs do not take custody of client accounts in an omnibus structure. They require a qualified custodian to onboard each one of their individual investor clients. They do not commingle customer accounts into a single omnibus pool. As far as impact on Onramp, I feel this analogous to the ‘rising tide lifting all boats.’ Blackrock and Coinbase are two heavyweights that are significantly lifting the tide of digital assets
This deal was likely in the works for a long time and has less to do with the current market conditions than it does with the maturation of the market. “The institutions are coming,” has been a rallying cry for a long time. This is simply the validation of that idea. We often don’t realize it but many of the more traditional institutions interact with digital assets already – think firms like Pimco, Invesco, etc. As these large asset managers and institutions pressure their existing software providers eg. Aladdin to integrate crypto, it is only natural that they should oblige.
In general, RIAs and institutions are unlikely to go to Coinbase directly. The fees are higher and it is not considered a qualified custodian which is important for fiduciaries recommending something to clients. Assets held in Coinbase Prime are held under a different regulatory regime and are therefore limited to institutions. Retail investors can not become clients of Coinbase Prime, thus RIAs and their clients are unlikely to be able to access Coinbase’s services at this time. Onramp is working to change this with Coinbase, but at this time, their Prime platform is primarily structured to serve the institutional market.
Up to this point, very few qualified custodians have been willing to onboard individual “retail” clients directly. Gemini and Prime Trust are the two dominant players in this market at this time willing to work directly with individual clients while granting trading and viewing privileges to a third party such as an RIA. As you may know, both Coinbase and Gemini are investors in Onramp. Onramp already enables RIAs to link their client’s Coinbase accounts to the platform. As we move upmarket to the banks and broker-dealers, we will likely begin to offer direct integration to Coinbase Prime as well.
As stated above, I become even more enthusiastic for Onramp’s game-changing potential as I see more partnerships like this. Our mission is to connect all of the world’s digital asset infrastructure to traditional investments and enable RIAs to access the investors and investments of tomorrow, today. It’s great to see the BlackRocks of the world move to support that horizon as well.
Eric Ervin, CEO
Onramp Invest, Inc.