BitGo becomes first regulated cryptocurrency custodian
As the cryptocurrency market continues to languish, crypto-focused companies remain focused on improving on-ramps for institutions to enter the space. The latest example came on Thursday when blockchain startup Bitgo announced it had received a state trust company charter from the South Dakota Division of Banking, effectively making the company the only regulated custody service solely focused on the storage of cryptoassets.
Custody remains one of the biggest roadblocks for large financial institutions to enter the cryptocurrency space. Assuming an investment bank wants to make a sizeable purchase of cryptocurrency, as of now, it would have no safe place to store it. This alone has kept most institutions squarely on the sidelines when it comes to investment in cryptocurrency.
But, as Bitgo’s CEO Mike Belshe explained in the company’s press release, this might be about to change:
“Custody has been the missing piece of cryptocurrency market infrastructure and this gap has kept institutional investors out of the market. Traditional custodians don’t have experience handling cryptocurrency. Exchanges that double as custodians present a conflict of interest and raise regulatory concerns. BitGo Trust Company is a qualified custodian, and therefore the only custody offering that delivers the highest levels of both security and regulatory compliance.”
Headquartered in Palo Alto, Bitgo introduced the first multi-signature hot wallet in 2013. According to its website, Bitgo processes $15 billion in cryptocurrency transactions per month, and 15% of all global Bitcoin transactions, making it the world’s largest processor of on-chain Bitcoin transactions. The company supports upwards of 75 coins, and has over 300 clients in over 50 countries, including Bitbay, the leading cryptocurrency exchange in Europe, cryptocurrencies Ripple and Civic, and blockchain-focused investment firm, Pantera Capital.
Per their press release, BitGo custody offers:
- 100% cold storage technology in bank-grade Class III vaults
- Support for 75+ coins and tokens
- Institutional-grade policy controls
- Multi-user accounts
- Fast onboarding
- 24/7 support
Bitgo is far from the only cryptocurrency company targeting the custody space, hoping to get a piece of the institutional money if and when it flows into crypto market, as has long been promised. Notably, Coinbase, Gemini, Citi, and Ledger have made inroads into custody, and Goldman Sachs has been rumored to be exploring it as well.
As quoted by CNBC, Bernstein analyst Christian Bolu wrote in a note to clients in August:
“As the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms to engage in the eco-system. These include the provision of custodial and asset management services as well as traditional brokerage functions like market-making.”
Looked at in the most positive light, BitGo’s announcement last week could be a harbinger for Wall Street’s coming involvement in the cryptocurrency space. However, the company (and its competitors) must first deliver on their promise of safe, reliable crytpoasset storage for institutions to enter the space with full force and confidence.