In a recent company ‘AMA’ call, Coinbase CEO Brian Armstrong and CFO Alesia Haas addressed growing concerns over the security and transparency of Bitcoin exchange-traded funds (ETFs), firmly defending the firm’s position as a leading custodian in the U.S. market.
Responding to a question from Bloomberg’s James Seyffart, Armstrong emphasized Coinbase’s dominant role in the Bitcoin ETF custody market, estimating the company’s share at more than 80%. He framed this concentration as a competitive advantage, highlighting Coinbase’s reputation as a trusted counterparty in the institutional space. “We do have pretty dominant market share in terms of custody for the ETFs. I see that as a strength. We’re the trusted counterparty on the institutional side. I think we’re far ahead there, and it’s a great business for us,” Armstrong stated.
Addressing Concentration Risk and Security
While acknowledging the concerns about concentration risk, Armstrong noted that large ETFs often diversify their custodians as assets scale, which has allowed competitors to gain limited market share over time. “We remain the dominant custodian for U.S. Bitcoin ETFs, with roughly 80% plus market share. Larger funds often diversify custodians as they scale, a shift I consider healthy and good,” he explained.
Armstrong also touched on the security of Coinbase’s custody infrastructure, pointing to the company’s use of cold storage systems that are regularly penetration tested and audited. “We have secured patents related to our custody technology and employ cryptographers to harden defenses against attacks. Large financial institutions and government clients also conduct their own audits,” he added.
Responding to ‘Paper Bitcoin’ Claims
When asked about the sentiment circulating on social media that Bitcoin ETFs are not fully backed by real Bitcoin, Armstrong expressed confusion over the origin of these concerns. “I don’t understand where these concerns are coming from. Spot Bitcoin ETFs are required to be fully backed by the underlying asset,” he said.
Haas provided more detail, explaining that critics are often calling for public ‘proof of reserves,’ such as the disclosure of on-chain wallet addresses tied to ETF holdings. “We do not disclose client wallet addresses for security and confidentiality reasons, but ETF issuers and custody clients can independently verify their assets on-chain,” she clarified. Haas further noted that the custody business is ‘separately audited,’ with Coinbase producing SOC 1 and SOC 2 reports that demonstrate controls are in place and operating effectively. These audits reconcile holdings back to the blockchain and confirm that assets are segregated by clients, including ETF issuers.
Regulatory Stance on the CLARITY Act
Later in the call, Armstrong and Haas addressed regulatory developments around the proposed U.S. crypto market structure legislation, often referred to as the CLARITY Act. Armstrong pushed back on claims that Coinbase withdrew support for the bill, clarifying that the company objected to a specific draft it viewed as unworkable. “We have spent more than $100 million over several years advocating for regulatory clarity. Earlier drafts made concessions to traditional financial trade groups that could stifle crypto innovation. Negotiations are ongoing, and we remain engaged with lawmakers, regulators, and industry participants,” he said.
Armstrong expressed optimism about the bill’s passage, arguing that statutory clarity would provide long-term certainty beyond shifting leadership at agencies like the SEC. “I think the bill will get done. It’s in everyone’s interest at this point,” he concluded. If legislation stalls, Armstrong said Coinbase would continue operating under existing rules while seeking clarity through regulators or the courts.
Conclusion
Coinbase’s leadership has taken a firm stance on the security and transparency of Bitcoin ETFs, reinforcing their commitment to maintaining the trust of institutional investors. As the crypto landscape continues to evolve, the company’s efforts to address regulatory and security concerns will be crucial in shaping the future of digital asset custody and trading.
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