During a recent ‘Ask Me Anything’ (AMA) session, Coinbase executives responded to increasing scrutiny surrounding Bitcoin exchange-traded funds (ETFs). They defended the company’s prominent role as a custodian while countering allegations that spot Bitcoin ETFs are underpinned by “paper Bitcoin” rather than actual assets.
In response to an inquiry from Bloomberg’s James Seyffart, CEO Brian Armstrong noted that Coinbase holds a significant portion of the U.S.-listed Bitcoin ETF custody market, estimating its market share to be over 80%. He framed this concentration as a competitive advantage rather than a vulnerability.
Armstrong remarked, “We do have a dominant market share in terms of custody for the ETFs. I see that as a strength. We are the trusted counterparty on the institutional side, and I believe we are significantly ahead in this sector, which presents a lucrative opportunity for us.”
While acknowledging concerns regarding concentration risk, Armstrong highlighted that larger ETFs typically diversify their custodians as their assets scale, which has allowed for the gradual acquisition of market share by competitors.
He reiterated Coinbase’s dominance as the custodian for U.S. Bitcoin ETFs, asserting that the company maintains “over 80% market share,” while emphasizing that the diversification of custodians by larger funds is a “healthy and good” trend.
Armstrong also addressed the security of Coinbase’s custody infrastructure, citing cold storage systems that undergo regular penetration testing and auditing.
He mentioned that Coinbase has secured patents related to its custody technology and employs cryptographers to bolster defenses against potential attacks. Additionally, he noted that major financial institutions and government entities conduct their own audits to further validate security.
When questioned by Seyffart about sentiments circulating on social media, implying that Bitcoin ETFs are not fully backed by actual Bitcoin, Armstrong expressed confusion over these concerns, reiterating that spot Bitcoin ETFs must be fully supported by the underlying asset.
Coinbase CFO Alesia Haas elaborated on the situation, noting that critics often demand public “proof of reserves,” such as the disclosure of on-chain wallet addresses tied to ETF holdings. While Haas explained that Coinbase does not disclose client wallet addresses for security and confidentiality reasons, she emphasized that ETF issuers and custody clients have the capability to independently verify their assets on-chain.
Haas further stated that the custody business is “separately audited,” highlighting that Coinbase produces SOC 1 and SOC 2 reports, which demonstrate effective operational controls. These audits reconcile holdings back to the blockchain and confirm that assets are segregated for clients, including ETF issuers.
According to Haas, every custody client can observe their assets on-chain and is aware of the addresses associated with their holdings. “We would never disclose addresses that we hold on behalf of clients,” she added, suggesting that Coinbase could explore tools allowing clients to independently showcase their proof of reserves, should they choose to do so.
Discussion on the CLARITY Act
Later in the AMA, Armstrong and Haas provided insights on regulatory developments concerning Coinbase’s stance on the proposed U.S. crypto market structure legislation, commonly referred to as the CLARITY Act.
Armstrong countered assertions that Coinbase had withdrawn support for the bill, clarifying that the company objected to a specific draft deemed unworkable.
He indicated that Coinbase has invested over $100 million in advocacy for regulatory clarity over several years, arguing that earlier drafts had made concessions to traditional financial trade groups that might hinder crypto innovation.
Armstrong noted that negotiations are ongoing, with lawmakers, regulators, and industry stakeholders actively engaged. He expressed confidence that a market structure bill will ultimately pass, asserting that statutory clarity would offer long-term certainty beyond leadership changes at agencies like the SEC. Should legislative efforts stall, he stated that Coinbase would continue to operate under existing regulations while seeking clarity through regulatory channels or legal avenues.
“I believe the bill will be enacted,” Armstrong stated. “It is in everyone’s interest at this juncture.”
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