Coinbase says it won’t cut fees as BlackRock, Fidelity ignite Bitcoin ETF turf war

With the SEC’s final blessing, crypto’s Bitcoin ETF era has begun. And so has a fee war among issuers like BlackRock and Fidelity.

As for Coinbase, notorious for its high fees, it says it’s not worried about the new competition from Wall Street.

Market participants have eagerly awaited the introduction of spot Bitcoin ETFs for over a decade.

Many expect the funds to bring an influx of new cash, and Coinbase agrees.

“The spot ETFs will be additive to the crypto market and Coinbase,” a spokesperson told DL News via email.

Bitcoin ETFs “open the door for new entrants like wealth platforms, IRAs and tax advantaged accounts to deploy capital into crypto through a familiar wrapper, which previously couldn’t engage,” the spokesperson said.

Issuers, including BlackRock, Fidelity, and Ark Invest, have already engaged in a price war as issuers jostle for investors.

Cathie Wood’s Ark Invest will charge zero fees for the first year, while BlackRock is offering 0.12% for the same period, and rising to 0.25% after that.

Coinbase isn’t worried about competition, despite analysts questioning the exchange’s high retail transaction fees.

Coinbase doesn’t disclose its basic retail fees, but the retail take rate — which is measured by dividing trading revenue on the exchange by retail trading volume — was around 2.5% in the third quarter.

The exchange also offers advanced trading options where users can pay 0.6% on trades up to $10,000.

“Coinbase currently has no plans to reduce transaction fees due to the introduction of ETFs,” the spokesperson told DL News.

The exchange said that spot ETFs “will be a positive catalyst for the entire crypto space, adding credibility, increasing liquidity, and bringing new participants and institutions into the cryptoeconomy.”

The ETFs could bring new users into crypto, Coinbase said, and going forward these users will “want to engage more with the broader crypto economy directly through Coinbase.”

Coinbase will provide a range of services to ETF issuers — notably, it is named as a custodian on eight of the 11 applications.

“The primary way we’ll monetise is through custody fees, but we will also be providing key services like agency trading, matching and settlement, and financing,” the exchange’s spokesperson told DL News.

Custody fees are estimated to be between 0.1% and 0.16%, according to investment bank KBW, while trading fees will be around 0.02%.

The investment bank said the impact on gross profit could be around 0.4% if Bitcoin ETF’s assets under management reach $6.3 billion.

This is around 0.7% of Bitcoin’s total circulating supply, which would be similar to the total amount of gold held in gold ETFs globally.

About $98 billion of gold’s $13.9 trillion total global value is held in spot ETFs.

Adam Morgan McCarthy is a markets correspondent for DL News. Have a tip? Contact the author at adam@dlnews.com.