Tagomi and Coinbase have held acquisition talks, and insiders say it's a perfect match

Count this as the first signal of a wave of consolidation in the cryptocurrency market.

San Francisco-based cryptocurrency exchange Coinbase and prime broker firm Tagomi have held "late stage" acquisition talks, according to several people familiar with the deal. If the deal were to close it would be among the higher-profile acquisitions by the firm, which has scooped up over a dozen firms, including broker-dealer Keystone and decentralized exchange Paradex. 

Led by former Goldman Sachs partner Greg Tusar and Jennifer Campbell, formerly of Union Square Ventures, Tagomi emerged from stealth mode in May 2018. Backed by billionaire Peter Thiel's Founders Fund, the company sought to provide a platform for large traders and investors to trade across a number of cryptocurrency marketplaces and venues with the goal of capturing the best price. It routes to Coinbase, Gemini, as well as market-making firms like Jane Street. 

In recent months, the firm began targeting more retail trading clients, such as high-net-worth individuals and active traders. Sources say that move put the firm more squarely in competition with Coinbase Pro, Coinbase's professional trading offering. A tie-up between Tagomi, which insiders say offers superior capabilities to Coinbase Pro, could sure up the cryptocurrency exchange's market share among active traders. As for Tagomi, the firm could benefit from Coinbase's larger balance sheet, which insiders say would make it a more effective prime broker. 

It's not clear if the deal will go through. A Coinbase spokeswoman declined to comment. 

A source familiar with the situation said that Tagomi is in a solid financial position and has runway to operate for another two years, adding that the firm's functionalities — such as lending and borrowing — has made it an attractive target for a potential acquisition. As such, Tagomi has held a number of conversations with interested parties.  

To date, Tagomi has raised $28 million. In March, it announced it raised $12 million from Pantera Capital and Paradigm. Previously, it raised $16 million from Digital Currency Group, SV Angel, and Founders Fund.