VanEck Advisor Flags Risk of Coinbase As Majority Ethereum ETF Custodian
Highlights
- Gabor Gurbacs flags risk with Coinbase as custodian for most issuers.
- Eight of nine issuers used Coinbase as custodian in their filings.
- A similar scenario was recorded with Bitcoin ETFs approved in January.
VanEck advisor Gabor Gurbacs has flagged potential risks with the majority of spot Ethereum ETF issuers in the United States making Coinbase asset custodians. The reason is not far-fetched as it raises the issue involved with concentration of funds in a particular issuer. The Securities and Exchange Commission (SEC) approved spot Ethereum ETF listings driving up market sentiments.
VanEck Advisor Cites Custody Risk
Gabor Gurbacs highlighted potential risks with the vast majority of issuers choosing Coinbase as custodians for spot ETFs. In a series of posts on X (formerly Twitter), he noted that Coinbase holds assets for eight out of nine Ethereum ETFs. While he hailed the security team of Coinbase, the VanEck advisor pointed to a situation if something goes wrong.
“Coinbase holds assets for 10 out of 11 spot Bitcoin ETFs and 8 out of 9 ETH ETFs. While I am sure they have a great security team, I fundamentally question the competency and judgment of boards and risk management committees at fund issuers who think this is an acceptable risk.”
He added even traditional assets are not remotely safe because most boards are incompetent. Clearing the air, he noted that he likes Coinbase and appreciates the work done but a single entity counterparty is an unacceptable risk. While the majority of funds chose Coinbase, VanEck went with Gemini as its custodian. On the other hand, Fidelity will offer self-custody of its assets.
Also Read: Swiss Banks Replacing US Banks For Crypto Payments After FTX Collapse
Ethereum ETFs Toe Line as Bitcoin EFTs
As the market finally sees approval of spot Ethereum ETFs in the United States, users draw similar lines with Bitcoin ETFs. This is because a majority of issuers also used Coinbase as their custodians which also raised similar concerns. A cross-section of users believe that most issuers wanted to proceed with a working template.
Dave Abner, a principal at Dabner Capital Partners stated this issue of unnecessary risk for investors. “There is concentration risk because of so many firms using Coinbase as a crypto custodian. Even if that turns out not to be a problem for the SEC, to me it seems like an unnecessary risk for investors and I’m surprised that a multi-custodian setup isn’t required of issuers, just to protect against unforeseen problems.”
Also Read: BlackRock Ethereum ETF Goes Live for Trading, What to Expect From Day 1?
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