Softbank Backed Startup to Add Crypto Trading, Challenges Coinbase

Stock brokerage firm DriveWealth, a start-up backed by SoftBank has entered the cryptocurrency arena by the launch of two subsidiaries designed to allow partners to offer crypto trading to retail traders and investors. 

Catering The Retail Crowds

The SoftBank-backed start-up helps fintech firms such as Revolut offer stocks and the company is set to acquire a crypto firm founded by Harvard-trained quants.

Reportedly, the two subsidiaries will be designed to handle and execute trades, according to DriveWealth CEO Bob Cortright. 

The New Jersey-based start-up, valued at $2.85 billion has helped popularize fractional trading by allowing partners such as Revolut and Block’s Cash App to offer their users pieces of stock.

DriveWealth currently has more than 100 partners around the world with a total of 15 million investors. 

DriveWealth’s CEO Bob Cortright revealed that the firm’s entry into the crypto space was motivated by traders who have to trade across ‘unsustainable’ transaction spread on exchanges like Coinbase. He further added:

“As regulatory environments tighten around crypto and customers get more focused on spreads and efficiency, we can’t continue in a world where you can charge 200 basis points on a transaction.”

Could the Coinbase Effect Wear Off?

Coinbase effect is a crypto phenomenon wherein a Coinbase listing positively affects a token’s price. But with the monopoly of such exchanges getting challenged can such phenomena wear off as the market matures?

Some of the largest crypto exchanges like Coinbase, Gemini, and Binance US have high exchange fees which have irked users for quite some time.

Coinbase is the largest US-based crypto exchange with fees as high as 4.5% of the transaction value in addition to separate spread fees on its platform. In a recent earnings call, Coinbase said it was testing a subscription model as it expected pressure on fees over the longer term. 

According to the firm, crypto is one of the most requested products among partners, and the same drove DriveWealth to the space. The new crypto offerings by the firm will be made possible by DriveWealth’s recent acquisition of Crypto-Systems, a separate crypto startup.

The DriveLiquidity subsidiary is set to provide liquidity for partners wishing to invest in and trade cryptocurrencies.

Notably, DriveWealth has launched DriveDigital as a subsidiary crypto exchange and it plans on providing API (application programming interface) access to its partners to allow retail investors to make trades on Bitcoin (BTC) and Ethereum (ETH).

With newer alternatives coming to the crypto space offering cost-effective and accessible options for crypto trading and investing, the monopoly of bigger exchanges like Coinbase could fade. On the other hand, such alternatives could introduce more retail crowds to the crypto space thus lifting the larger narrative for digital assets.