Major cryptocurrency exchange Coinbase is acquiring the Peter Thiel-backed prime crypto brokerage Tagomi.

In an announcement on May 27, the exchange claimed the acquisition agreement came at “an inflection point in the industry,” a moment when increasing numbers of hedge fund and macro investors are venturing into the crypto space.

According to Coinbase, the exchange has seen a “swell in demand” for crypto investment opportunities from institutional clients over the past year, which has prompted it to roll out new targeted offerings such as margin trading and has boosted growth in its professional custody service, Coinbase Custody.

Today’s announcement comes on the heels of media stirrings back in fall 2019, when Coinbase was moved to officially deny it had then acquired Tagomi. 

As reported at the time, some had claimed that Tagomi’s increased appeal to retail trading clients and high-net-worth individuals had brought it into direct competition with Coinbase’s professional trading platform, Coinbase Pro.

Tagomi’s success

Since its launch 18 months ago, Tagomi has established itself as a reputable, regulated crypto brokerage firm, securing the notoriously exacting BitLicense from the New York State Department of Financial Services in March of last year. 

In its announcement today, Coinbase noted that Tagomi had become “the platform of choice for many advanced traders, hedge funds, and family offices,” including Paradigm, Pantera, Bitwise and Muticoin.

Tagomi has multiple connections with major initiatives in the industry, including its partnership with Binance.US and membership in the Libra Association, the governing body for the Facebook-led stablecoin.

The brokerage has enabled its users to lend or borrow Bitcoin (BTC) and Ether (ETH) to facilitate long or short trades since fall 2019, and has in the past secured financial backing from PayPal co-founder Peter Thiel, the Yale-backed Paradigm Fund and crypto industry giant Pantera Capital.

Coinbase fleshes out its institutional strategy

As part of the exchange’s evolving institution-oriented offerings, Coinbase Custody obtained two new security evaluations for its professional services earlier this year. 

In late January, Coinbase had also established an entity in Ireland to enable it to expand its crypto custody services to European institutions.