Crypto security startup BitGo has today received green light from the South Dakota Division of Banking to act as a qualified custodian for digital assets, meaning it can now offer institutional clients a regulated storage solution for cryptocurrencies.
Due to concerns about security, custody is often seen as a missing part of the puzzle for the uptake of cryptocurrencies among institutional investors. Many existing storage offerings are provided by crypto exchanges without the backing of a traditional custodian.
BitGo has been looking to solve this issue throughout 2018, with its own developments and the failed acquisition of Kingdom Trust, a digital asset custodian with roughly $12 billion in assets under storage. Now the Palo Alto-based startup has been given a major boost as BitGo Trust Company is becoming the first qualified custodian purpose-built for storing digital assets.
In an announcement, Mike Belshe, BitGo CEO, said:
“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.”
BitGo Trust Company will be subject to regulatory scrutiny which includes Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) checks as well as filing of financial audits and monthly disclosures.
Alongside BitGo, this year has also seen major U.S. wallet and exchange service provider Coinbase as well as Japan’s Nomura Bank launch their own custody solutions. As part of the forthcoming Bakkt platform, New York Stock Exchange (NYSE) operator ICE will also bring a new major trusted custodian solution to the crypto space.