The U.S. Marshals Service (USMS), a branch of the Department of Justice tasked with asset forfeiture, has inked a $32.5 million contract with Coinbase Prime, the brokerage arm of the prominent crypto exchange Coinbase, to provide custody and trading services for its significant cryptocurrency holdings.
Coinbase Prime Secures Major Government Contract
In a blog post on Monday, Coinbase announced its selection by the USMS due to its robust track record and capacity to deliver institutional-grade crypto services. This partnership underscores Coinbase Prime’s status as a trusted custodian, managing over $330 billion in assets as of this year.
Details of the Agreement
The contract stipulates that Coinbase Prime will manage and dispose of the USMS’s large-cap cryptocurrencies. This move is expected to bolster Coinbase Prime’s standing as the go-to platform for institutions and significant holders of digital assets. Since its launch nearly three years ago, Coinbase Prime has become a primary partner for numerous spot cryptocurrency exchange-traded funds (ETFs), with an institutional trading volume of $256 billion recorded in the first quarter of 2024 alone.
Supporting Law Enforcement
Coinbase highlighted its long-standing support for law enforcement agencies, dating back to the creation of its law enforcement program in 2014. The company now collaborates with every major U.S. federal, state, and local law enforcement agency, as well as international agencies across every continent. Coinbase emphasized that these partnerships are crucial to promoting safe and efficient markets, which is integral to their mission of growing the cryptoeconomy.
Government Crypto Holdings
This selection comes as the U.S. government recently moved to sell 3,940 Bitcoin, valued at around $240 million, seized from a narcotics trafficker in 2014. The U.S. government has become one of the largest Bitcoin holders, accumulating approximately 200,000 coins (worth around $5 billion) through various seizures related to criminal activities.
Coinbase’s Regulatory Challenges
Despite this significant contract, Coinbase continues to navigate regulatory hurdles. In April, Judge Katherine Polk Failla of the US District Court of the Southern District of New York allowed the SEC’s lawsuit against Coinbase to proceed. The lawsuit alleges that Coinbase operates as an unregistered securities exchange, broker, and clearing agency.
Furthermore, Coinbase has accused the SEC and the Federal Deposit Insurance Corporation (FDIC) of improperly blocking its document requests, claiming that the regulators are withholding documents that should be accessible under the Freedom of Information Act (FOIA).
Positive Market Outlook
Amid these regulatory challenges, Coinbase has received positive market evaluations. Bank of America (BAC) recently upgraded its rating on Coinbase shares from underperform to neutral, raising its price target to $217 from $110. Investment banking firm KBW also increased its price target for Coinbase from $160 to $230, maintaining its market performance rating.
This contract with the USMS is a significant milestone for Coinbase Prime, reinforcing its position as a leading institutional crypto service provider while navigating the complexities of regulatory scrutiny.
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