Stock brokerage firm DriveWealth, a SoftBank-backed start-up has entered the cryptocurrency arena with the launch of two subsidiaries designed to allow partners to offer cryptocurrency trading to retail traders and investors.
Restoring the retail crowds
The SoftBank-backed start-up helps fintech firms like Revolut offer stock, and the company is poised to acquire a cryptocurrency firm founded by Harvard-trained quants. The two subsidiaries will reportedly be designed to manage and execute transactions, according to DriveWealth CEO Bob Cortright.
The New Jersey-based start-up, valued at $ 2,85 billion, helped popularize fractional trading, allowing partners like Revolut and Block's Cash App to offer their users pieces of stock. DriveWealth currently has more than 100 partners worldwide with a total of 15 million investors.
DriveWealth CEO Bob Cortright revealed that the company's entry into the cryptocurrency space was motivated by traders having to trade through “unsustainable” transaction spreads on exchanges like Coinbase. He further added:
"As regulatory environments tighten around cryptocurrencies and customers focus more and more on spreads and efficiency, we can't continue in a world where 200 basis points can be charged on a transaction."
Could the Coinbase effect wear off?
The Coinbase effect is a crypto phenomenon in which a Coinbase listing positively affects the price of a token. But with the monopoly of such exchanges being challenged, can these phenomena fade as the market matures?
Some of the biggest cryptocurrency exchanges like Coinbase, Gemini, and Binance US have high exchange fees that have been pissing off users for some time. In a recent earnings call, Coinbase said it was testing a subscription model as it expected pressure on fees over the long term.
According to the company, cryptocurrency is one of the most requested products among the partners, and it has pushed DriveWealth into space. The company's new cryptocurrency offering will be made possible by the recent DriveWealth acquisition of Crypto-Systems, a separate cryptocurrency startup. The DriveLiquidity subsidiary is intended to provide liquidity to partners wishing to invest and trade cryptocurrencies.
Specifically, DriveWealth has launched DriveDigital as a cryptocurrency exchange subsidiary and plans to provide API (application programming interface) access to its partners to allow retail investors to carry out transactions on Bitcoin (BTC) and Ethereum (ETH).
With new alternatives arriving in the crypto space offering affordable and accessible options for crypto trading and investing, the monopoly of larger exchanges like Coinbase could vanish. On the other hand, such alternatives could introduce more retail crowds into the crypto space thus raising the biggest narrative for digital assets. And what do you think of this initiative? Could it tempt you to download these platforms? Let us know in the comments section below.
