Grayscale Investments has tapped Coinbase Custody to serve as the new security provider for its digital asset holdings, the companies announced Friday.

The custodian, which Coinbase CEO Brian Armstrong says already holds $1 billion in assets, will act as the custodian for Grayscale's single-asset and diversified investment products.

Grayscale claims to hold $2.7 billion in total assets under management, according to its most recent quarterly report, more than doubling its Q1 holdings of $1.2 billion.

Grayscale holds bitcoin, bitcoin cash, ethereum, ethereum classic, litecoin, Stellar lumens, XRP and zcash. Coinbase Custody also intends to hold Grayscale's horizen (ZEN) token, pending regulatory approval to support the asset.

Most of the assets are being transferred to Coinbase Custody from Grayscale's existing security provider, Xapo. The private keys for Grayscale's horizen are also currently being held by the Digital Asset Custody Company, which bitcoin futures platform Bakkt acquired earlier this year.

Coinbase Custody

began holding Grayscale's assets on July 29, according to a press release. Coinbase Custody is regulated through the New York Department of Financial Services, and is a regulated fiduciary under New York's banking law.

In a statement

, Coinbase Custody CEO Sam McIngvale explained that the business is "held to the same fiduciary standards as national banks. We also offer some of the broadest and deepest insurance coverage in the crypto industry."

He added:

Under the agreement, Coinbase Custody will hold Grayscale's assets for three years at the outset, charging a fee based on the assets under custody. Both companies have escape clauses for the three-year period, according to a press release. Once the initial term ends, each company can terminate the partnership with 90 days' notice.

Brian Armstrong image via CoinDesk archives