Executives at Coinbase addressed the increasing scrutiny surrounding Bitcoin exchange-traded funds (ETFs) during a recent company ‘Ask Me Anything’ (AMA) session, defending their position as a leading custodian in the sector. In particular, they pushed back against claims that spot Bitcoin ETFs may be backed by “paper Bitcoin” rather than actual assets.
When asked by Bloomberg analyst James Seyffart about Coinbase’s role in the U.S. Bitcoin ETF custody market, Coinbase CEO Brian Armstrong estimated that the company commands over 80% of the market share. He framed this dominance not as a risk but as a competitive advantage, asserting that Coinbase is a trusted counterparty for institutional clients. “We’re far ahead there, and it’s a great business for us,” Armstrong stated, underscoring that large ETFs usually diversify their custodians as their assets grow, allowing for a limited market share for competitors.
Armstrong also reassured attendees about the security measures in place at Coinbase’s custody infrastructure, highlighting the use of cold storage systems that undergo regular penetration testing and audits. He noted that the firm has secured patents for its custody technology and employs cryptographers to enhance security against potential attacks, reiterating that both large financial institutions and government clients conduct their own audits.
In response to concerns circulating on social media regarding the authenticity of Bitcoin backing for ETFs, Armstrong expressed confusion over these claims and emphasized that spot Bitcoin ETFs are mandated to be fully backed by the underlying asset. Coinbase CFO Alesia Haas elaborated on this point, noting that critics often demand public “proof of reserves,” such as the disclosure of on-chain wallet addresses tied to ETF holdings. However, she reaffirmed that Coinbase maintains strict confidentiality by not disclosing client wallet addresses while stating that ETF issuers and their custody clients can independently verify their assets on the blockchain. Haas claimed that the custody business undergoes separate audits and produces SOC 1 and SOC 2 reports that showcase effective operational controls.
During the discussion, Haas also clarified that all custody clients can view their assets on-chain and know which addresses are associated with their holdings, emphasizing that Coinbase would never disclose clients’ addresses. She mentioned that the firm might consider developing tools allowing clients to share proof of reserves independently, should they choose to do so.
Additionally, Armstrong and Haas touched on the CLARITY Act, which pertains to proposed U.S. crypto market structure legislation. Armstrong refuted claims that Coinbase withdrew support for the act, asserting that the company’s objections were related to a specific draft deemed unworkable. He highlighted Coinbase’s investment of over $100 million in advocating for regulatory clarity over recent years, arguing that earlier drafts included concessions that could hinder crypto innovation.
Armstrong stated that negotiations over the legislation are still active, with lawmakers, regulators, and industry participants engaged in discussions. He expressed optimism about the passage of a market structure bill, suggesting that clear statutory provisions would provide long-term stability amid changing leadership at agencies such as the SEC. Should legislative progress stall, he reiterated that Coinbase would continue operating under the existing regulatory framework while seeking clarity from regulators or through the courts. “I think the bill will get done,” he asserted. “It’s in everyone’s interest at this point.”
