A license that falls under the wing of New York State Banking Law has been awarded to Coinbase Custody Trust Company; an institutional-grade service designed to securely store large sums of cryptocurrency.
In an announcement made today on the Coinbase blog, Coinbase Custody now has the legal authority to operate as a Qualified Custodian. It is important to note that Coinbase’s Custody Trust is technically classified as an independent entity that isn’t legally tied to the Coinbase brand that crypto investors have grown to love (and hate in some cases).
Chartered by the New York Department of Financial Services (NYDFS), Coinbase Custody is now effectively a Limited Purpose Trust Company and fiduciary under New York State Banking Law.
The license is a huge step forward, not just for Coinbase, but for all those involved in blockchain technologies. The latest license awarded to Coinbase Custody shows that government organizations are increasingly accepting the fact that digital currencies are becoming an integral addition in the ever-changing financial landscape.
Coinbase Custody Have Agreed To Comply With Rigorous NYDFS Banking Standards
Obtaining a license from the NYDFS as a company that deals in digital assets is no easy task. Under the new licensing laws, Coinbase Custody will be required to adhere to the same compliance regulations as any other traditional fiduciary custodial business that deals in fiat currency.
For those who are unaware, traditional Limited Purpose Trust Companies function as a safe keeper for mortgages or securities. The most well-known organization in the fiat currency market is The Depository Trust Company (DTC), which operates as a depositor or safe keeper of large sums of fiat currencies for investment firms and banks.
Coinbase Custody will be operating similar services, but this time, solely for digital currencies. The startup will act as the depositor or safe keeper for crypto for exchanges and other businesses involved in blockchain technologies, such as hedge funds and other investment firms.
The firm has entailed following strict anti-money laundering procedures, storage as well as security (cybersecurity) processes, as well as capitalization rules.
Customers Are Guaranteed Regulatory Clarity Under The New License
Coinbase Custody has already prided itself for its secure offline storage of digital assets that are fully insured. Now in addition to this, gaining New York State Trust Company status shows customers that the firm is now also following strict regulatory guidelines. With both measures in place, the crypto firm has just doubled its appeal to investment and hedge fund companies investing in crypto markets.
Under the new license, Coinbase Custody will be able to store digital assets that are in compliance with NYDFS Banking Standards. For customers of the crypto firm, this offers them regulatory clarity and the confidence that their cryptocurrency is being stored and managed in accordance with the same laws used to govern fiat currencies.
It is the closest any fintech firm dealing in crypto has been to giving crypto the same regularity emphasis as fiat currencies, thus bringing digital currencies a step closer to the mainstream financial markets.