Coinbase CEO Brian Armstrong Addresses “Paper Bitcoin” Claims, Claims Bitcoin ETFs Are Fully Backed

Executives at Coinbase used a recent company ‘AMA’ call to address growing scrutiny around Bitcoin exchange-traded funds, defending the firm’s dominant role as a custodian and pushing back against claims that spot Bitcoin ETFs are backed by “paper Bitcoin” rather than real assets.

Responding to a question from Bloomberg’s James Seyffart, Coinbase CEO Brian Armstrong said the company holds a commanding share of the U.S.-listed Bitcoin ETF custody market, estimating Coinbase’s share at more than 80%. He framed that concentration as a competitive advantage rather than a risk.

“We do have pretty dominant market share in terms of custody for the ETFs. I see that as a strength. We’re the trusted counterparty on the institutional side. I think we’re far ahead there, and it’s a great business for us,” Armstrong said on the call. 

He acknowledged concerns about concentration risk but noted that large ETFs often diversify custodians as assets scale, which has allowed competitors to gain limited market share over time. 

Armstrong said Coinbase remains the dominant custodian for U.S. bitcoin ETFs, with roughly “80% plus market share,” while noting that larger funds often diversify custodians as they scale, a shift he called “healthy and good.”

Armstrong touched on the security of Coinbase’s custody infrastructure, pointing to cold storage systems that are regularly penetration tested and audited. 

He said Coinbase has secured patents related to its custody technology and employs cryptographers to harden defenses against attacks. Large financial institutions and government clients also conduct their own audits, he added.

When Seyffart asked about sentiment circulating on social media that Bitcoin ETFs are not fully backed by real Bitcoin. Armstrong said he does not understand where those concerns originate, reiterating that spot Bitcoin ETFs are required to be fully backed by the underlying asset.

Coinbase CFO Alesia Haas offered more detail, explaining that critics are often calling for public “proof of reserves,” such as disclosure of on-chain wallet addresses tied to ETF holdings. Haas said Coinbase does not disclose client wallet addresses for security and confidentiality reasons, but stressed that ETF issuers and custody clients can independently verify their assets on-chain.

Haas said the custody business is ‘separately audited,’ noting that Coinbase produces SOC 1 and SOC 2 reports that demonstrate controls are in place and operating effectively. 

Those audits reconcile holdings back to the blockchain and confirm that assets are segregated by clients, including ETF issuers.

Haas said every custody client can see its assets on-chain and knows the addresses associated with its holdings. “We would never disclose addresses that we hold on behalf of clients,” she said, adding that Coinbase could explore tools that allow clients to disclose proof of reserves themselves if they choose.

Bitcoins Coinbase executives touch on the Clarity Act

Later on in the call, Armstrong and Haas addressed regulatory developments around Coinbase’s stance on proposed U.S. crypto market structure legislation often referred to as the CLARITY Act. 

Armstrong pushed back on claims that Coinbase withdrew support for the bill, saying the company objected to the specific draft that it viewed as unworkable.

Coinbase has spent more than $100 million over several years advocating for regulatory clarity, Armstrong said, arguing that earlier drafts made concessions to traditional financial trade groups that could stifle crypto innovation. 

He said negotiations are ongoing and that lawmakers, regulators, and industry participants remain engaged.

Armstrong said the company expects a market structure bill to pass and argued that statutory clarity would provide long-term certainty beyond shifting leadership at agencies like the SEC. If legislation stalls, he said Coinbase would continue operating under existing rules while seeking clarity through regulators or the courts.

“I think the bill will get done,” Armstrong said. “It’s in everyone’s interest at this point.”