Stock brokerage firm DriveWealth has reportedly entered the crypto sector by launching two subsidiaries designed to enable its partners to provide crypto trading services to retail investors. DriveWealth strives to become a crypto liquidity provider to compete with Coinbase while offering its partners’ retail clients the ability to trade cryptocurrency on their platforms.
DriveWealth is a New Jersey-based firm that is backed by Japanese tech giant Softbank and is valued at $2.85 billion. The latest push into the cryptocurrency space was motivated by traders forced to trade across what DriveWealth CEO Bob Cortright told CNBC is an “unsustainable” transaction spread on Coinbase. He added:
“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 biggest US-based crypto exchange and it charges fees as high as 4.5% of the transaction value and a spread fee on its platform. The exchange earned 88% of its $1.2 billion in total revenue from these transaction fees in Q3, based on its financial report at the time.
These new crypto offerings are made possible by DriveWealth’s recent purchase of Crypto-Systems, a separate crypto startup. Through this acquisition, DriveWealth unveiled its DriveLiquidity subsidiary that will offer liquidity for the partners that want to invest in and trade cryptocurrency assets.
DriveWealth has also unleashed DriveDigital as a subsidiary cryptocurrency exchange. It wants to offer API (application programming interface) access to its partners to enable retail investors to make trades on Ethereum (ETH) and Bitcoin (BTC).
Cortright stated that a growing number of firms across different fields are requesting access to crypto liquidity to enable users to trade or earn crypto rewards. He stated:
“Even the established, large e-commerce players are finding that, when surveying their clients, a huge percentage want to own some crypto.”
If it wants to compete with Coinbase, DriveWealth has an authentic uphill battle to climb. The crypto exchange had more than 68 million users as of Q3 2021. Coinbase (COIN) also touts a $39 billion market capitalization with an enterprise valuation of nearly $36.5 billion.
