BitGo wants to be ‘exchange agnostic’ as a qualified custodian

BitGo wants to reduce the “redundancy of exchanges.”

In partnership with Copper, international institutions will have the choice to access certain spot and derivative exchanges from cold storage. The partnership will allow the two to reduce the redundancy of having exchanges integrate with multiple custodians.

A press release on the announcement names ByBit, OKX, Bitfinex and Bitstamp as a few of the exchanges accessible.

“ClearLoop continues to be an important product for offshore institutional investors for mitigating counterparty risk and capital efficiency. With strong ecosystem partnerships, like BitGo, and the right architecture, we can finally see a maturation of distributed financial market infrastructure,” said Copper’s CEO Dmitry Tokarev.

Put simply, BitGo aims to “intentionally” separate “regulated custody from being able to still access liquidity in the market.” 

BitGo seeks to marry the “cold storage ability to manage those assets in a way that meets the needs of regulators but also allows those assets to stay connected to the marketplace,” BitGo’s managing director Matt Ballensweig told Blockworks.

The FTX collapse spooked both investors and institutions and though it’s been a year — with the anniversary of the bankruptcy announcement on Nov. 11 — some institutions and even retail investors are still reeling from the aftereffects.

The FTX chapter, however, is hopefully coming to a close with former CEO Sam Bankman-Fried found guilty of fraud and money laundering.

Ballensweig told Blockworks that BitGo — alongside many in crypto — wants to avoid another FTX.

“We’re exchange agnostic,” he said. “We’re not partial to a certain exchange, whereas, if you’re trading directly on the exchange, or that exchange has its own custody, or the exchange has its own capital market services, then then you’re obviously subject to the risk of that platform.”

As for who would be interested: Ballensweig confirmed that BitGo is “talking to a lot of hedge funds internationally about coming into the space for the first time.” He added that the firm has spoken to liquidity providers and market makers as well.

“This is a way to increase the overall pie globally amongst traditional firms that are…more established and derisk market structure in traditional assets. And that’s kind of what we’re recreating in crypto,” Ballenswig said.

The overall crypto market is working to put FTX fully in the rearview, and focusing more on general adoption. One of the primary focuses — shown by how quickly both investors and the markets jumped at a now-debunked post about BlackRock’s ETF approval — are spot bitcoin ETFs. There’s no clear indication if the Securities and Exchange Commission will approve the ETF applications, but analysts such as Eric Balchunas and James Seyffart feel optimistic.

Ballensweig admitted that ETF approval is “top of mind for us.”

“At this point, there’s no doubt the market has legs. There’s no doubt we’re at the precipice of mainstream adoption…Obviously, that’s gonna be the global catalyst that gets a ton of new eyes looking at the space.” 

The company, outside of the new partnership, received a license from the German Federal Financial Supervisory Authority (BaFin) earlier this week.

Prior to the license, BitGo operated in Germany under BaFin supervision as part of a “transitional regime.”

Ballensweig said that BitGo, going forward, is seeking to “broaden our reach into different segments of the market.” His focus is Go Network, the settlement network offered by the custodian. 

“We’re really trying to make Go Network, I would say, the primary utility layer that sits inside a qualified custodian for existing but mostly new market participants.”

Updated Nov. 3, 2023 at 4:36 pm ET: Added additional context throughout.

Updated Nov. 3, 2023 at 1:30 pm ET: Added comment from Copper CEO Dmitry Tokarev.

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