BitGo, a crypto startup focused on security, has received approval from the Banking Division of the South Dakota Department of Labor and Regulation to operate as a custodian for cryptocurrencies. As a result, the firm can now offer its regulated custodial services to institutional investors.
Security concerns are one of the prime reasons for institutional investors to shy away from crypto currencies. The storage solutions offered by most of the cryptocurrency exchanges are not backed by a regulated custodian.
BitGo wanted to resolve this issue by launching its own services, after failing to acquire Kingdom Trust, a cryptocurrency custodian service with roughly $12 billion in assets under control.
The approval has given BitGo a big breakthrough as it stands to serve as the first qualified custodian specifically established to store cryptocurrencies.
Commenting on the approval, 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.”
The company will be fully compliant with regulatory norms such as Anti-Money Laundering (AML) and Know-Your-Customer (KYC) process, in addition to regular financial audits and routine monthly disclosures.
Notably, US-based Coinbase and Nomura Bank of Japan have recently launched custody solutions. Likewise, Intercontinental Exchange, which operates NYSE and plans to launch the much anticipated Bakkt platform, will also offer state-of-the-art cryptocurrency custody solutions.
