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San Francisco-based cryptocurrency exchange Coinbase has announced its plan to acquire Tagomi, a prime brokerage platform specializing in digital asset trading. Announced on May 27, the two companies said the deal is expected to be finalized by this year, without disclosing the financial terms.
*Prime brokerage : A prime brokerage is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients that need to be able to borrow securities or cash in order to engage in netting to achieve absolute returns. (Source: Investopia)
Coinbase is a well-known San Francisco-based cryptocurrency exchange. The company provides cryptocurrency exchange services with currencies including Bitcoin, Ethereum, and Litecoin, and boasts more than 12 million customers. Founded in 2012, Coinbase has raised USD105 million in venture capital funding from New York Stock Exchange, banks USAA and BBVA, and former Citibank CEO Vikram Pandit, as well as Andreesson Horowitz, Reddit Capital and Union Square Ventures. Coinbase believes that digital currency will open up to more equal opportunities, efficiency, and innovation from around the world by creating an open-window financial system.
Tagomi is an secure platform that that broker exchanges for coins headquartered in San Francisco. The company makes commission deals and provides brokerage service related to cryptocurrency including wealth management, transaction reporting, payment, management and security, and it's secured USD 12 mn worth of investment from Pantera Capital, etc in March 2019. Tagomi is an electronic agency brokerage service for individual investors in the cryptocurrency market. Its service also closes a position for the trader at a most reasonable price, quite equivalent to a securities company. In March 2019, Tagomi was awarded BitLicense, a business license of virtual currency activities, from the New York Department of Financial Services (NYDFS).
Coinbase said the acquisition comes at something of an inflection point in the industry
Coinbase also said "it has seen a 100% increase in volume from professional and institutional traders over the past three months," evaluating the current state as 'an inflection point'. The company stated, "We are going to be integrating the Tagomi platform into our product suite and it will form the foundation for the future of our institutional trading business... Tagomi will continue to operate for the near future. We’re still thinking through long-term options."
Will transparent prime brokerage service be possible at Coinbase's Tagomi?
Tagomi has had a focus on best execution. It has aggregated orders across 10 or so large crypto exchanges, including Coinbase, Binance and Gemini, and then routing clients’ transactions to the venues offering at the ultimate prices. However, some commentators were concerned about conflicts of interest from the two once the acquisition actualized.
"No problem" say Tagomi
Asked if being owned by Coinbase created any kind of conflict of interest, Bhargava said he didn’t necessarily think so. “We think we will still be able to deliver really great pricing to our clients,” said Bhargava. “Obviously, we will still have market maker relationships. Over time, we’ll disclose which exchanges we continue to work with.”
Only time can tell how the interests of Coinbase and Tagomi will progress.
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