Blockchain security firm BitGo gets regulatory approval to start crypto custody services
In an interesting development, the Palo Alto, California-based crypto wallet and blockchain security firm BitGo has received the green light by the South Dakota Division of Banking to start crypto custody services. This makes it a crypto custodian, just like traditional Wall Street custodians such as State Street and Bank of New York. As per South Dakota regulations, the company won't begin storing assets under the Trust until a 30-day period has elapsed.
By creating its trust company, California-based BitGo will now be subject to regulatory scrutiny that encompasses know-your-customer (KYC) and anti-money-laundering (AML) checks and the filing of financial audits and monthly disclosures.
At the launch of the crypto custody offering, BitGo co-founder and CEO Mike Belshe said:
"This is the missing piece for infrastructure — it's a treacherous environment today. Hedge funds need it, family offices need it, and they can't participate in digital currency until they have a place to store it that's regulated."
“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,” he added.
Regulated crypto custody is the missing piece of the puzzle
There’s a sense of uncertainty and fear among the institutional investors which is preventing them from engaging in the crypto ecosystem and many believe that the absence of reputable custody is one of the major impediments in wider adoption of cryptocurrencies.
Monica Sommerville of consulting firm TABB Group, while speaking to CNBC said:
"Institutional investors are very interested in finding a solution, but they haven't seen one that they think is perfect for various reasons. They still self-custody, and manage all their own keys."
BitGo is not the first cryptocurrency company to offer custody services. There’s an ongoing race to attract institutional investors. Coinbase and Gemini have both launched their own custody solutions in a bid to attract institutional investors to the market. And as some reports suggest, leading financial institutions such as Goldman Sachs and Northern Trust are also reportedly planning to launch similar services.
While individual retail investors have the relatively secure option of storing crypto themselves in offline cold storage, family offices and hedge funds are required by the U.S. Securities and Exchange Commission (SEC) to use a third-party regulated institution to safely store assets if they are worth over $150 million, as CNBC reports.
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