Armstrong Puts a Number on It
Coinbase CEO Brian Armstrong disclosed on X on February 20 that his company custodies more than 80 percent of all US-listed Bitcoin and Ethereum ETF assets, with a peak of $31 billion in ETF inflows flowing through Coinbase's institutional platform. The statement came during what appeared to be an informal update rather than a scheduled earnings call, but the numbers carry weight: as of the time of writing, US crypto ETFs collectively hold roughly $140 billion in assets under management, meaning Coinbase is responsible for securing approximately $112 billion in digital assets on behalf of ETF issuers alone.
That figure does not include Coinbase's broader custody business, which reached $300 billion in assets under custody as of Q3 2025. Eight of the top ten Bitcoin-holding public companies, including Strategy (formerly MicroStrategy), also rely on Coinbase Prime for asset custody. The exchange has become the de facto vault for institutional crypto in the United States.
The 1.5 Million BTC Question
To understand the scale of this concentration, consider the raw numbers. Coinbase custodies roughly 1.5 million BTC across spot Bitcoin ETFs, which represents approximately 7 percent of Bitcoin's maximum 21 million supply. Add in Ethereum ETF holdings, and the company is holding keys to a meaningful fraction of two entire blockchain networks' circulating value.
Bloomberg analyst James Seyffart has repeatedly flagged what he calls a "single point of failure" risk. The concern is straightforward: if Coinbase experienced a major operational disruption, a cybersecurity breach, or a regulatory freeze, the ripple effects would not stay contained to one exchange. They would cascade through every major Bitcoin and Ethereum ETF simultaneously. BlackRock's IBIT, the largest spot Bitcoin fund with tens of billions in assets, uses Coinbase Custody. So does Fidelity's competitor fund (though Fidelity self-custodies its own). ARK Invest and 21Shares recently began diversifying by adding Anchorage Digital as a co-custodian, but the shift is marginal compared to the total pool.
This is not a theoretical concern. The crypto industry has lived through the consequences of custody concentration before. When FTX collapsed in November 2022, billions in customer assets vanished because one entity controlled both the exchange and the custody layer. Coinbase is a fundamentally different company, publicly traded and regulated, but the structural lesson remains: concentration creates fragility regardless of the counterparty's reputation.
Why the Moat Keeps Growing
Coinbase's custody dominance is not accidental. The company was the first major US exchange to build institutional-grade custody infrastructure, and it secured SOC 2 Type II certification, insurance policies, and regulatory approvals years before competitors entered the space. When the SEC approved spot Bitcoin ETFs in January 2024, most issuers had exactly one credible custody option. Coinbase was already there.
The result is a self-reinforcing cycle. More ETFs launch with Coinbase custody, which generates more custody fee revenue, which funds more compliance and security infrastructure, which makes Coinbase the default choice for the next ETF filing. For Coinbase shareholders, this is a revenue engine: custody fees are recurring, low-churn, and not dependent on volatile trading volumes. Armstrong's $31 billion inflow figure underscores how much institutional capital is flowing through that engine.
But the moat also acts as a barrier to systemic resilience. Traditional finance learned this lesson decades ago with clearing houses and prime brokers. When one entity becomes too central, regulators typically mandate diversification. The crypto ETF market has not yet reached that point, though signs of movement are emerging.
Competitors Circling, Slowly
The custody landscape is beginning to shift, albeit gradually. Anchorage Digital, a federally chartered crypto bank, secured custody roles for ARK's ARKB (holding approximately $3 billion) and 21Shares' CETH. US Bancorp revived institutional Bitcoin custody plans in 2025. Citi and State Street are reportedly exploring crypto ETF custody relationships, signaling that traditional financial giants see an opening.
For now, these competitors are nibbling at the margins. Coinbase's 80 percent share has barely budged despite a full year of competition since the ETF launches. The switching costs are high: ETF issuers must navigate regulatory approvals, due diligence processes, and operational migration to change custodians. Most prefer to add a secondary custodian for redundancy rather than replace Coinbase entirely.
Bitwise predicts over 100 new crypto ETFs will launch in 2026 following the SEC's approval of generic listing standards. If those new products follow the same custodial playbook, Coinbase's absolute AUC will grow even as its percentage share might dip slightly.
What This Means for Everyday Crypto Holders
The custody concentration debate might seem like a Wall Street problem, but it has direct implications for anyone holding crypto through an ETF in a brokerage account, a retirement plan, or even indirectly through a pension fund that has allocated to digital assets.
If you hold Bitcoin through an ETF, you are trusting Coinbase with your exposure whether you chose to or not. The ETF wrapper abstracts the custody layer, meaning most retail investors never think about who is actually holding the keys. That abstraction is a feature until it becomes a failure point.
This is one reason the self-custody card movement continues to gain traction. Products from Gnosis Pay, MetaMask, and Ready let users spend directly from wallets they control, eliminating the custodial intermediary entirely. The tradeoff is convenience: ETFs are easier to buy in a brokerage, and custodial cards from Coinbase or Bybit offer smoother onboarding. But the philosophical question is the same one Seyffart is asking: how much trust should be concentrated in one entity?
The Regulatory Blind Spot
US regulators have not yet addressed crypto custody concentration directly. The SEC's ETF approval process evaluates each fund individually, not the systemic risk created by multiple funds sharing the same custodian. This is a gap that traditional financial regulators closed long ago for equities and bonds. The DTCC, which settles the vast majority of US stock trades, operates under explicit Federal Reserve oversight and capital requirements designed to prevent single-point-of-failure risk. Coinbase Custody has no equivalent regulatory framework.
The OCC's conditional approval of Bridge (Stripe's stablecoin subsidiary) for a national bank trust charter in early 2026 suggests regulators are beginning to think about institutional crypto infrastructure more seriously. But a comprehensive custody concentration framework remains years away, if it comes at all.
In the meantime, Armstrong's 80 percent figure sits in plain sight, a number that is simultaneously Coinbase's greatest competitive advantage and the crypto ETF market's most obvious vulnerability.
FAQ
How much of US crypto ETF assets does Coinbase custody? More than 80 percent, according to CEO Brian Armstrong's February 20 disclosure. In dollar terms, that translates to roughly $112 billion out of approximately $140 billion in total US crypto ETF assets under management as of February 2026.
Is Coinbase the only custodian for Bitcoin ETFs? No. Fidelity self-custodies its own spot Bitcoin ETF, and Anchorage Digital has secured custody roles for ARK's ARKB and 21Shares' CETH. However, the vast majority of ETF assets remain with Coinbase. US Bancorp, Citi, and State Street are exploring entry into crypto custody.
What happens if Coinbase experiences a major breach or operational failure? Because Coinbase custodies assets for most US Bitcoin and Ethereum ETFs, a significant disruption could affect the majority of spot crypto ETFs simultaneously. This is the "single point of failure" risk that analysts like Bloomberg's James Seyffart have flagged. ETF shares could trade at significant discounts to NAV if the underlying custody layer is compromised.
Does this affect people who hold crypto in their own wallets? No. Self-custody users are not exposed to Coinbase's custodial concentration. This risk specifically affects those who hold crypto exposure through ETFs or through Coinbase's exchange and custody products directly.
Overview
Coinbase CEO Brian Armstrong disclosed that his company custodies more than 80 percent of all US Bitcoin and Ethereum ETF assets, with peak inflows reaching $31 billion. The concentration, which amounts to roughly 1.5 million BTC or 7 percent of total supply, has drawn warnings from Bloomberg analysts about systemic single-point-of-failure risk. While competitors like Anchorage, US Bancorp, and traditional banks are entering the space, Coinbase's first-mover advantage and high switching costs have preserved its dominance. The gap highlights a regulatory blind spot: no US framework addresses custody concentration for digital asset ETFs the way existing rules govern clearing houses for traditional securities. For individual investors, the data reinforces the distinction between custodial convenience and the sovereignty offered by self-custody products.
Recommended Reading
- Bitcoin ETFs Are Sitting on $53 Billion in Net Inflows After Two Years
- BlackRock Will Skim 18 Percent of Staked Ethereum ETF Rewards as ETHB Filing Reveals the True Cost
- Coinbase Expands Crypto-Backed Loans to XRP, DOGE, ADA, and LTC
