BitGo Inc., a closely held crypto-security firm, agreed to buy Bitcoin custodian Kingdom Trust as it seeks to attract as much as $20 billion that institutional investors could commit to digital currencies.
Kingdom Trust is a regulated custodian of more than $12 billion in assets, Palo Alto, California-based BitGo said Thursday in a statement announcing the acquisition. Terms weren’t disclosed.
Based in Murray, Kentucky, Kingdom Trust is among the few firms qualified to safeguard Bitcoin for institutional investors. It holds assets for clients including 401(k) accounts and family offices. The two companies said they are targeting bigger investors looking for a way into cryptocurrencies, and BitGo Chief Executive Officer Mike Belshe estimated that $20 billion of institutional cash is chomping at the bit.
“What we’ve seen in the last year and a half is this massive shift where the new folks that want to get in -- financial institutions and businesses -- they would much prefer and much rather see custodial options,” Belshe said in an interview. BitGo knows the technology side of the industry, while Kingdom Trust has the regulatory experience, he said.
In traditional finance, custody banks like State Street Corp. hold securities, keep records and provide other services for investment advisers. A lack of similar offerings in the cryptocurrency world has kept many institutions on the sidelines, Belshe said.
“If you’re an SEC-regulated fund over $150 million, you’re required to use a qualified custodian,” he said. “You can’t just take some guy and have him hold your coins for you.”
Cryptocurrency exchange Coinbase Inc. announced in November that it was planning to offer a similar product as it sought to lure hedge funds, but said the following month that it was not yet a qualified custodian.
BitGo, which provides cryptocurrency wallets and offline vaults for businesses, first joined forces with Kingdom Trust about two years ago. The custodian can now safeguard six different digital coins for clients.
About BitGo
BitGo is a blockchain software company that secures digital currency for institutional investors. Its technology solves the most difficult security, compliance and custodial problems associated with blockchain-based currencies, enabling the integration of digital currency into the global financial system. BitGo's customers, which include the world's largest cryptocurrency exchanges and financial institutions, conduct more than $10 billion in transactions monthly.
About Kingdom Trust
Kingdom Trust is an independent qualified custodian and a non-depository trust company regulated by the South Dakota Division of Banking. The firm is a leading provider of unique and innovative custody solutions for individual investors, investment sponsors, family offices, advisory firms, broker-dealers and various other investment platforms. Kingdom Trust is a passive, non-discretionary custodian. The firm does not provide, promote, endorse or sell investment products and does not endorse or promote any individual investment advisor or investment sponsor. For more information, please visit KingdomTrust.com.