Investment giant Goldman Sachs has led a successful $59 million Series B funding round in crypto custodian service BitGo, in the latest example of a major Wall Street institutional investor backing the cryptocurrency sector.
With the conclusion of the funding round this week, the latest round of funding takes the total backing for the firm to $70 million.
Goldman Sachs are joined by Galaxy Digital Ventures, the fund founded by prolific cryptocurrency investor Mike Novogratz, in backing the firm, with $15 million contributed to the total between them, Bloomberg first reported.
BitGo founder Mike Belshe said that the challenge for the firm remained convincing investors of the merits of cryptocurrency as an investment asset class. He said, “If you were investing in any other asset class, you’re probably not worried about the asset just disappearing—but this one, people still have that fear…we’ve got to conquer that.”
BitGo was founded back in 2013, and manages as much as $2 billion in assets across 95 cryptocurrencies. Following recent regulatory approval from regulators in the South Dakota Division of Banking, the firm has become the first regulated crypto custodian of its kind.
The backing of high profile names like Goldman Sachs and Galaxy Digital Ventures will lend even more credibility to the startup, as it looks to increase its assets under custody,
Managing Direct of Principal Strategic Investments at Goldman, Rana Yared, said institutional investors required secure and regulated custody before considering investing in crypto assets: “Greater institutional participation in the digital asset markets requires secure and regulated custody solutions.”
“We are impressed by BitGo’s product, unique services, and the management team. We view our investment in BitGo as an exciting opportunity to contribute to the evolution of this critical market infrastructure,” Yared said.
The investment comes at a time of increasing activity in the crypto custody space, including from legacy financial firms looking to diversify into this emerging market.
Fidelity Investments, which manages assets worth $7.2 trillion, has recently announced the launch of a new company to provide crypto custody services, while Goldman Sachs themselves are reported to be considering custody products. The BitGo funding comes as another solid vote of confidence in the cryptocurrency sector from major banking and financial institutions.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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The South Dakota Division of Banking has approved the BitGo Trust Company’s application as a cryptocurrency custodian.
In a press release, the company said it had become “the first qualified custodian purpose-built for storing digital assets.” BitGo CEO Mike Belshe said, “Custody has been the missing piece of cryptocurrency market infrastructure and this gap has kept institutional investors out of the market.”
He noted the gap between those in the custody business and those who have knowledge of virtual currencies. “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.”
The company offers 100% cold storage technology in bank-grade Class III vaults, supporting over 75 coins and tokens. To further promote the new service, BitGo is offering credit for fees if after a year, the balance of assets under custody is equal to or greater than the previous 12-month period.
BitGo boasts of being the world’s largest processor of on-chain BTC transactions, processing 15% of these worldwide.
In August, it was reported that Goldman Sachs was looking to offer a cryptocurrency custody service, among other blockchain-related ventures. The other month, cryptocurrency exchange Coinbase officially launched Coinbase Custody, which was created along with Electronic Transaction Clearing (ETC).
CNBC quoted Christian Bolu, analyst for investment research firm Sanford C. Bernstein, saying that the institutional adoption of the industry required more developed custody services. According to the analyst, “As the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms to engage in the ecosystem. These include the provision of custodial and asset management services as well as traditional brokerage functions like market-making.”
Among other companies looking to get into custody services are Fidelity, JP Morgan and Nomura.
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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