American crypto wallet and blockchain security firm BitGo has received a state trust company charter from the South Dakota Division of Banking, making it a qualified custodian for crypto.
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.
As it launches its regulated crypto custody offering, BitGo co-founder and CEO Mike Belshe told CNBC that:
“This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.”
As previously reported, the narrative that custody is one of the chief remaining obstacles for the crypto market to “mature” and draw institutional investment is widely shared. CNBC interviewed Monica Sommerville of consulting firm TABB Group, who noted that:
“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.”
Somerville added that she worked with one family office who reportedly stores clients’ crypto in “baby carrot”-sized crypto hardware wallets organized in binders until “a better alternative” is found.
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.
Alongside BitGo, this year has 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 its forthcoming Bakkt offering, New York Stock Exchange (NYSE) operator ICE will also bring a new major trusted custodian solution to the crypto space.