Can Coinbase Increase Institutional Investors Confidence in Digital Assets?

August 24, 2018

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By David Drake

Coinbase, one of the leading cryptocurrency exchange, is positioning itself to attract institutional investors. The exchange recently hired Jeff Horowitz, formerly the managing director and chief compliance officer of Pershing LLC, as its chief compliance officer.  
By hiring Horowitz, Coinbase hopes to expand the innovative market through his guidance as well as add new services which include Coinbase custody and broker dealing to its portfolio.
Previously, Horowitz has been credited for introducing programs in anti-money laundering and regulation in leading financial institutions including Goldman Sachs. His experience will be important to Coinbase as the exchange aims to provide cryptocurrency solutions for institutional investors and hedge funds.

Decentralized Tokens
With the growth of the cryptocurrency sector and the increasing interest by governments to examine its operations, there is need for companies to ensure compliance with industry regulations. Horowitz’s background in compliance and regulation will ensure that Coinbase introduces administrative measures for its services and complies with existing regulations.
This progressive step will help boost investor confidence. Even so, cryptocurrency industry players feel that Horowitz needs to pay attention to decentralized tokens to help Coinbase capture the attention of traditional hedge funds.
Raghav Reggie Jerath, CEO of Gath3r says, “Coinbase should avoid listing utility coins as they have very little utility as of now and are highly speculative, hence they would not be attractive to traditional investors. Coinbase should focus on decentralised tokens in general as centralised coins add management failure risk as well. Utility tokens that have been trading for some time and prove to have actual use outside of speculation, utility and are in compliance with US regulations can be considered by Coinbase in the future.”
In the US, the Securities and Exchange Commission (SEC) has been paying close attention to the risks posed by the cryptomarket, especially initial coin offerings (ICOs). Though innovative ICOs designed to address real problems like IOU, HFC Coin, BQT, URAllowance and OptDyn do exist, the presence of fake projects designed to defraud investors has seen the SEC issue investor alerts.
On various occasions, the regulator has also disapproved cryptocurrency activities that fail to meet the laid down SEC guidelines. But according to Joseph Oreste, founder and CEO of Qupon, the lack of clear regulations by the SEC is also ‘keeping institutional investors and hedge funds out of the cryptocurrency space.’

Security Concerns
The cryptomarket has experienced losses occasioned by hackings, causing investors to become cautious of digital assets.  
According to Reginald Ringgold, CEO at Blockvest, to increase investor confidence in digital assets, Horowitz must address the discomfort that investors have with regard to cyber attacks. In recent years, digital currency investors have lost millions of dollars in cryptocurrency investments.
In Coinbase, Horowitz’s experience in building anti-money laundering and fraud prevention programs will address the security concerns investors have so they can begin to view cryptocurrencies as a good investment.
For the cryptocurrency exchange, having Horwitz on board is a great step in the right direction. His main task will be to boost investor confidence in the services offered that Coinbase offers by contributing to its security and regulations. 

Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.