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Kraken Mulls Crypto ETF Custody Amid Spot Ethereum ETF Anticipation

Kraken, a prominent cryptocurrency exchange, is reportedly exploring entry into the cryptocurrency ETF custody market, coinciding with the highly anticipated approval of a spot Ethereum ETF. As per an exclusive report by Fox Journalist Eleanor Terrett, Kraken, the second largest exchange in the United States, aims to join the ranks of companies like Coinbase in offering crypto ETF custody services.

Coinbase, led by CEO Brian Armstrong, currently holds a dominant position in providing custody services for nine out of the 12 proposed Bitcoin ETFs in the United States. Custodians play a crucial role in securely holding assets on behalf of others, ensuring the protection of Bitcoin owned by ETFs from potential threats such as hackers.

“I think Coinbase is the obvious solution on the custodian side, and it makes sense that they’re the most common,” remarked James Seyffart, an ETF analyst at Bloomberg Intelligence. “But there are some others.”

Taking inspiration from Coinbase’s significant role as a custodian for most recently approved spot Bitcoin ETFs, Kraken is reportedly aiming to secure custody for the highly anticipated spot Ethereum ETFs.

Kraken’s CEO, David Ripley, revealed in January that the exchange plans to launch a new custody product in the current quarter. During a Bloomberg television interview, Ripley emphasized that this move “will be a big event for us.”

“There’s often synergy for a lot of customers between custody and liquidity being in the same place,” Ripley added, highlighting the potential benefits for customers.

Kraken’s Foray into Crypto ETF Custodianship Market

With the market eagerly awaiting regulatory approval for Spot Ethereum ETFs, Kraken’s entrance into the crypto ETF custodian arena signifies a significant milestone in the democratization of cryptocurrency investments.

Custody rates vary, ranging from 10 basis points for larger clients to 50 basis points for smaller ones, according to industry insiders. These rates may also differ based on whether customers utilize additional services such as trading.

“The ETFs will compete on price, and one of the key factors influencing price is the cost of custody platforms as well as trading spreads,” noted Gavin Michael, CEO of Bakkt Holdings.

Bakkt, a crypto trading and custody service, has been in discussions with several Bitcoin ETF managers, as mentioned by Michael earlier this month. Additionally, BitGo, under the leadership of Adam Sporn, its head of brokerage, is engaging with Bitcoin ETF issuers.

Kraken made headlines last year with its announcement to launch a new crypto bank, initially catering to customers in the US. According to Kraken, the ‘Kraken Bank’ will offer products such as deposit accounts in both USD and crypto assets, multiple funding and payment options, as well as institutional custody products, among others.

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Cryptocurrency is essentially virtual money that operates in a decentralized manner, not through a bank but directly on multiple independent computers.

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