San Francisco-based cryptocurrency giant Coinbase announced on Wednesday that it had acquired Tagomi, a prime brokerage platform specializing in digital asset trading. According to Coinbase, the deal will be finalized later this year.
Neither company has disclosed the acquisition price that Coinbase paid, but media reports have stated that multiple people familiar with the deal put it in the region of $75 to $100 million. The reports also indicate that Coinbase paid entirely with its privately held stock, and outbid another crypto giant – Binance.
The New York-based broker Tagomi is only two years old but has made big waves due to its executive team made up of veterans in the financial world. The company itself was founded by Greg Tusar, the former global head of electronic training at Goldman Sachs, and Jennifer Campbell, a venture capitalist at Union Square Ventures, and Marc Bhargava worked at McKinsey and Airbnb.
Tagomi has attracted many high-profile clients and backers, including Peter Thiel’s Founders Fund and crypto investment firms such as Polychain, Multicoin, and Pantera. It raised close to 28 million in venture capital funding and was valued at $72 million in early 2019 when it last raised funding.
The acquisition of Tagomi has been in the offing for some time, and it was said that Coinbase was close to a $150 million deal last year. However, in the end, the deal never materialized, and negotiations continued to drag on.
It is anticipated that acquiring Tagomi will help Coinbase to accelerate its progress on Coinbase Prime, a trading platform for institutional investors that it announced in 2018. Crypto prime brokerages appear to be in trend right now, with Genesis Trading, Bequant, and BitGo all developing their services.
The head of corporate development at Coinbase, Shan Aggarwal, stated that “We are going to be integrating the Tagomi platform into our product suite and it will form the foundation for the future of our institutional trading business.”
Similarly, Tagomi’s brokerage services will benefit from being acquired by Coinbase – mainly due to the $8 billion of Bitcoin and other cryptocurrencies in its balance sheet. Access to cheap funding will allow Tagomi to expand its services and provide them with higher liquidity.
Buying Tagomi is the latest in a series of critical acquisitions by Coinbase over the last two years. It first bought Earn.com for a reported $100 million, then purchased cryptocurrency custody company Xapo for $55 million.
Earn.com’s acquisition was the most controversial, as it was a company that mainly allowed people to monetize their advice. Of course, the information was more than just about how to buy Bitcoin with a credit card, and targeted experienced crypto investors.
At the time, it was speculated that the goal of the acquisition was to bring Earn.com’s CEO, Balaji Srinivasan, over to Coinbase as CTO and develop their institutional investment business. However, Srinivasan left Coinbase after just a year.
Now Coinbase appears to want to do the same again by purchasing Tagomi. Bringing talents such as Greg Tusar and Jennifer Campbell on board alongside their executive team should give their institutional investment business a boost. Both Tusar and Campbell have confirmed that they will stay on in Coinbase and have no plans to leave the company.
The COO of Coinbase, Emilie Choi, confirmed that initially, Tagomi would continue to operate at a separate entity and standalone brand. However, over time it is expected to be integrated into Coinbase Pro and Coinbase Prime. It is unknown exactly when that integration will take place.