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Goldman Sachs Group Inc. and a venture founded by one of its former partners, billionaire Mike Novogratz, are investing in cryptocurrency custodian BitGo Holdings Inc., the company announced in a press release published on October 18, 2018.

Goldman Wades Deeper in Crypto

(Source: BitGo)

BitGo, the market leader in institutional-grade cryptocurrency security, announced the second close of its Series B funding round on October 18, 2018. Among the company’s new investors were Goldman Sachs’ Principal Strategic Investments group and Galaxy Digital Ventures LLC, a venture investment firm founded by Michael Novogratz.

According to Bloomberg, Goldman Sachs and Novogratz’s Galaxy Digital Ventures contributed about $15 million to BitGo’s Series B fundraising, which brought in a total of $58.5 million. The funding will support BitGo’s development of its $1 trillion crypto wallet.

Goldman Sachs investment marks the bank’s first decisive move into cryptocurrencies after it had postponed its plans for offering crypto trading despite increasing customer demand.

“We believe that a custody offering is a logical precursor to digital asset market making,”

Goldman spokesman Michael DuVally said. The securities firm was among the first on Wall Street to clear Bitcoin futures introduced in 2017 and made the BitGo investment through its principal strategic investments group, where executives include Rana Yared, a managing director involved in developing Goldman’s crypto plans.


More Institutional Investment Might Increase Crypto Adoption

The endorsement from two major financial institutions with strong Wall Street roots may help BitGo attract more institutions and wealthy investors as customers. However, despite the increasing demand for regulated and institutionalized crypto asset trading, companies are still faced with significant roadblocks when it comes to government regulation.

U.S. regulators require large money managers to entrust client assets to a so-called qualified custodian, which are often industry pillars such as State Street Corp. and Bank of New York Mellon Corp, Bloomberg reported.

The lack of interest traditional financial institutions have shown in cryptocurrencies have paved the way for companies such as BitGo to pursue their business.

“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,” Mike Belshe, BitGo’s co-founder and chief executive officer, told the publication.

The Palo Alto-based company has worked to address the issue by offering digital wallets that require multiple signatures for transactions, as well as offline vaults for storing Bitcoin and rival currencies. After an initial deal to acquire a custodian fell apart in January 2018, the company set out to build its own qualified custody business, BitGo Trust Co.

The company has gathered a total of around $70 million in its two fundraising rounds, now holding more than $2 billion in assets, and currently provides services for more than 75 tokens.