Goldman Sachs Group Inc. and former Goldman partner Mike Novogratz have have executed a joint $15 million investment into cryptocurrency custodian BitGo Holdings Inc. The group’s contribution makes up over a quarter of the total $57.5 million raised in BitGo’s Series B fundraising round. The endorsement from Goldman and Novorgratz could help BitGo in attracting further support from other major institutional investors.
Bloomberg reports that there has been a deepening interest among Golman Sachs’ wealthy clientele to secure holdings in digital assets. However, the absence of quality crypto custodians, in conjunction with the ever-present dangers of hackers, has made the majority of Wall Street firms hesitant to enter into the market. Presumably, this is the motivation behind the widely supported efforts of BitGo’s custody project.
“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,” said Mike Belshe, BitGo’s co-founder and chief executive officer. He told Bloomberg that in order for cryptocurrencies to reach their full potential, “we’ve got to conquer that.”
BitGo is based out of Palo Alto and was founded in 2013. The company currently offers multi-signature digital wallets, in addition to offline cold storage vaults for Bitcoin and other major digital currencies. BitGo had agreed to acquire custodian firm Kingdom Trust in January, but the deal ended up falling through. Since then, BitGo has directed its efforts towards building its own qualified custody business, BitGo Trust Co.
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To date, BitGo has raised aproximately $70 million in fundraising rounds. The company reports to offer services for more than 75 coins and holds more than $2 billion in assets.
Goldman Sachs’ interest in BitGo is likely two-fold. As mentioned above, the need for a credible custodian service supporting large Wall Street firms is both necessary and in increasingly high demand by both major financial institutions and their clients. Additionally, Goldman has been openly considering plans to launch its own full-fledged crypto trading desk for some time now. Through the successful establishment of BitGo, the financial giant stands to gain immediate value from its investment, plus greater reassurance that their further expansion into the space is ready to be supported.
Goldman reports making the multi-million dollar investment into BitGo through its principal strategic investments group, who’s executives include managing director for Goldman’s crypto strategy team Rana Yared.
“We believe that a custody offering is a logical precursor to digital asset market making,” Goldman spokesman Michael DuVally said.
Finally, it’s worth noting that former Wall Street macro trader and current CEO of Galaxy Digital, Mike Novogratz, appears to be serving as a powerful liaison between Wall Street’s institutional giants and the world of cryptocurrency. It’s likely Novogratz’s long-standing relationship with Goldman played an instrumental role in strategizing and ultimately finalizing the deal between all parties.
Bloomberg concludes its article stating that although institutional-grade storage is hoped for by crypto enthusiasts to bring in more investors, a series roadblocks nevertheless remains. For one, there continues to be a frustrating lack of clarity among federal regulators in outlining laws that can both protect investors and support further innovation in the emerging market. This combined with general shell-shock caused by the market crash in early 2018, may imply that cryptocurrency still has a long road ahead before reaching the levels of mass adoption its supporters are anticipating.
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