BitGo Gets a Green Signal From Regulators and Becomes the First Qualified Custodian For Crypto Assets
BitGo has received approval from the South Dakota Division of Banking to act as qualified custodian for Crypto assets.
BitGo, which was founded back in 2013 spent most of 2018 trying to get approval to become a qualified custodian for Crypto assets and has now succeeded in doing so. Initially, BitGo planned to acquire Kingdom Trust Company (which held around $12 Billion worth assets) in order to become a qualified custodian, but after the deal fell through in May BitGo decided to build its own custodian service.
The South Dakota Division of banking approved BitGo Trust Company as a public South Dakota Trust company, which makes it the first qualified custodian for Crypto assets.
Mike Belshe, CEO of BitGo said in an announcement:
“Custody has been the missing piece of cryptocurrency market infrastructure and this gap has kept institutional investors out of the market,”
He also mentioned two other important points:
- Traditional custodians do not have the experience in handling Cryptocurrencies (as it is a fairly new industry and needs additional security measures).
- “Exchanges that double as custodians present a conflict of interest and raise regulatory concerns” as most Crypto exchanges are not fully regulated and there have been many instances of hacking or shady behaviors in the exchanges which can be a huge third party risk to many investors.
BitGo’s Chief Compliance and Legal officer Shahla Ali explained that they already offer a custodial solution currently which is a combination of a hot and cold wallet which is secure but not regulated.
She told Coindesk:
“The trust company will enable us to offer a qualified custodial offering that is regulated, that has the money laundering and know your customer requirements. Our custodian offering already has money laundering and KYC requirements … [but the Trust is] for institutional clients … especially for those who are registered advisors and broker dealers.”
Custody has been one of the biggest issues yet to be solved in the Crypto industry, as the assets are completely digital there is a high risk in terms of security which is a big barrier to entry for institutional investors to enter into this space. But because of interest from a lot of investors various custody solution is in development, companies like Goldman, Coinbase, Gemini are moving towards becoming trusted custodians for Crypto assets.
Ram NeuNer Tweeted:
The biggest barrier to institutional buying is custody, they simply don’t have the capabilities to keep Crypto safe for their clients. There are many solutions coming online, this is one of them and a very good one! A HUGE bridge built. https://t.co/QbAWE3k4jJ
— Ran NeuNer (@cryptomanran) September 14, 2018
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