Coinbase, Exchanges

Is Coinbase Custody a Qualified Custodian?

In order to offer services to institutional investors, Coinbase Custody must meet the definition of a qualified custodian. The definition of a qualified custodian is set forth in Rule 206(4)-2 under the Investment Advisers Act of 1940. The rule defines a qualified custodian as follows:

A bank, savings association, broker-dealer, Futures Commission Merchant (FCM), registered investment adviser, or other person who, pursuant to a written agreement or contract with an investment adviser registered under the Advisers Act, has agreed to hold in its custody clients’ securities and cash subject to the investment adviser’s control and authority.

NOTE: Coinbase Custody is not a qualified custodian according to the standards set by the U.S. Securities and Exchange Commission (SEC). It is not registered with the SEC or any other financial regulatory authority, and therefore may not provide the same safeguards that a qualified custodian would offer. Therefore, users should be aware of the risks associated with using Coinbase Custody as a custodian of their digital assets.

In order for an entity to fall within the definition of a qualified custodian, it must have physical possession of the securities it holds in custody for its clients. This is typically accomplished through the use of a third-party custodian such as a bank or broker-dealer.

Coinbase Custody uses multiple third-party custodians to hold the digital assets it holds in custody for its clients.

While Coinbase Custody is not itself a qualified custodian, it does meet the definition of a qualified custodian by virtue of its relationships with its third-party custodians. As such, Coinbase Custody is able to offer institutional investors the ability to custody their digital assets with a qualified custodian.

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