DriveWealth aims to be a crypto liquidity provider to compete with Coinbase while giving its partners’ retail clients the ability to trade crypto on their platforms.
Stock brokerage firm DriveWealth has entered the cryptocurrency industry by launching two subsidiaries designed to allow its partners to offer crypto trading to retail investors.
DriveWealth is a New Jersey-based company backed by Japanese tech giant Softbank and is valued at $2.85 billion.
The push into the crypto space was motivated by traders who are forced to trade across what DriveWealth CEO Bob Cortright told CNBC is an “unsustainable” transaction spread on Coinbase. He continued:
“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.”
Coinbase is the largest US-based crypto exchange and charges fees as high as 4.5% of the transaction value plus a spread fee on its platform. The exchange earned 88% of its $1.2 billion in total revenue from those transaction fees in Q3, according to its financial report at the time.
The new crypto offerings are made possible by DriveWealth’s recent acquisition of Crypto-Systems, a separate crypto startup. Through that acquisition, DriveWealth launched its DriveLiquidity subsidiary which will provide liquidity for partners wishing to invest in and trade crypto assets.
DriveWealth has also launched DriveDigital as a subsidiary crypto exchange. 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).
Cortright said that an increasing number of companies across various fields are requesting access to crypto liquidity to let their users trade or earn crypto rewards. He continued:
“Even the established, large e-commerce players are finding that, when surveying their clients, a huge percentage want to own some crypto.”
If it intends on competing with Coinbase, DriveWealth has a veritable uphill battle to climb. The exchange had over 68 million users as of Q3 2021. Coinbase (COIN) also touts a $39 billion market cap with an enterprise valuation of about $36.5 billion.