Different institutions around the world have expressed interest in joining the crypto-train. On February 7, DriveWealth, the SoftBank-backed startup, entered the cryptocurrency industry by launching two subsidiaries. However, with the increase in the number of institutions offering crypto services, this is not a complete surprise. But here’s how it could turn out to be an important development.
Fixing the fragments
The New Jersey-based company backed by Japanese investment firm Softbank entered the digital assets industry with the latest announcement. The CEO of this $2.85 billion company, Bob Cortright spoke to CNBC in an interview. He stated:
“…the acquisition of Crypto-Systems will enable DriveWealth to begin offering Bitcoin and Ethereum trading to its partners in April or May.”
Through that acquisition, DriveWealth launched its DriveLiquidity subsidiary. It would provide liquidity for partners wishing to invest in and trade crypto assets. DriveWealth also launched DriveDigital as a subsidiary crypto exchange. Furthermore, aimed at providing API (application programming interface) access to its partners.
The said executive hoped to incorporate “greater transparency into digital asset markets, which trade 24/7 on a fragmented global network of independent exchanges.” According to Cortright, traders were forced to trade on an “unsustainable” trade spread across crypto exchanges such as Coinbase. He asserted:
“As regulatory environments tighten around crypto and customers get more focused on spreads and efficiency, we can’t continue in a world where you can charge 200 basis points on a transaction.”
Here, one basis point equals 0.01%
Coinbase, one of the largest crypto exchanges, charged fees of up to 4.5% of the transaction value plus a spread fee on its platform. On the earnings call, the platform earned 88% of its $1.2 billion in total revenue from these transaction fees in the third quarter. Even Coinbase executives acknowledged the same. He was testing a subscription model because he expected longer-term fee pressure.
“To become a commercially viable product, you can’t have those types of transaction costs. It’s coming out of the wallets of the customers,” Cortright said. “We’ve done this before, we understand it.
More soon…?
A growing number of companies in various fields were requesting access to crypto liquidity, including major e-commerce players. Others would follow soon.
However, the journey to compete with Coinbase won’t be an easy ride. At the time of writing, Coinbase had over $39 billion market cap whereas DriveWealth stood somewhere around the $2 billion mark.
