Five Points to Consider When Choosing a Crypto Prime Broker

Since the 1980s, institutional investors have relied on traditional prime brokerage services to navigate their relationships with financial services providers for entry into particular asset classes.

Today, as Bitcoin and crypto top headlines and are discussed in boardrooms, more traditional financial institutions are introducing digital asset services to their clients and are thus looking for a reliable crypto-native prime broker to guide them.

In this blog, we discuss the intricacies of a full-service crypto prime offering and the important characteristics to consider when choosing a crypto prime broker.

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What does a full-service crypto prime offering look like?

In today’s crypto ecosystem, most institutions rely on a multitude of crypto service providers to replicate the same level of end-to-end prime services they are accustomed to in traditional finance, which include custody, trade execution, settlement, financing, etc. This piecemeal approach to prime brokerage services can create significant overhead, time delays, and more importantly, exposes institutions to operational and security risks.

At Gemini, we believe that a true full-service digital assets prime brokerage should offer in-house custody, financing, trading, and settlement services paired with dedicated client service partners all within the ecosystem of a trusted and regulated provider. In a true full-service digital assets prime brokerage model, clients interact with only one trusted provider, limiting their exposure.

Top five characteristics to consider when choosing a crypto prime broker

When it comes to end-to-end full-service prime brokerages, not all providers have the same level of crypto-native market expertise and breadth of services. Therefore, institutional investors need to consider these five points when selecting a prime broker:

1. Stability and creditworthiness of the provider: It is imperative to work with a seasoned crypto-native provider to ensure stability and creditworthiness. Questions that can shed a light include: How long has the provider been in existence and/or involved in the digital assets space? How is the institution funded? What are the chances of default? Where are my assets stored and how are they being used by my prime broker?
2. Security and compliance frameworks: Security is central to building trust and, importantly, to ensuring client funds remain protected. There are various security standards required across jurisdictions, and so an important first question to ask is: Is the provider subject to security requirements mandated by global regulatory authorities? You can also learn more about a provider’s security and compliance standards by asking questions like: Do they maintain annual security penetration testings performed by independent third party providers? Did they successfully complete their SOC 1 Type 2, SOC 2 Type 2 examinations?
3. Platform capabilities: With full-service crypto prime brokerages few and far between, one of the most important features to consider is the ability for the provider to offer access to a full-suite end-to-end platform. Connectivity between various venues, including decentralized and centralized financial institutions, as well as with fiat onramps should also be taken into account. As mentioned above, there are a variety of risks associated with a fractured approach to prime services, and minimizing the need to onboard a multitude of providers should be top of mind.
4. Ease of access and depth of liquidity: Not every trading desk will have optimal access to deep liquidity pools. Providing the best execution requires a provider to have extensive relationships with diverse partners and access to various products.
5. High-touch client service model: In the complex world of digital assets, ensuring that your prime brokerage provider offers the necessary guidance and high-touch client service is paramount to long-term success. Whether helping to navigate the dynamic ecosystem landscape or providing product support, effective and accessible high-touch client service can play an important role in a successful prime brokerage relationship.

As digital assets increasingly become part of the global financial fabric, we are confident that the need for full-service crypto prime brokerages will continue to rise. At Gemini, we seek to provide seamless prime brokerage services to all types of institutions seeking exposure to crypto. Having built a crypto-native and client-focused crypto prime brokerage in Gemini Prime, we invite you to learn more about our institutional solutions here.

Watch this space as we continue the conversation around crypto prime brokerages in the coming weeks and outline why we believe crypto-native prime brokers like Gemini Prime are the ideal venues for institutions seeking secure, regulated, and transparent access to crypto.

Onward and Upward!

Clark Read, Head of Gemini Prime
John Burnett, VP of Gemini Prime