BitGo, a cryptocurrency custodian based in the United States, has unveiled a regulated platform aimed at managing and safeguarding native tokens for Web3 protocols, as detailed in a statement shared with Cointelegraph on September 16.
This custody platform is designed for crypto-centric organizations, including foundations and protocols, enabling them to efficiently manage native tokens for distribution to investors, employees, grant recipients, and other stakeholders, according to BitGo.
While regulated digital asset custodians are becoming increasingly popular in the U.S. among investment managers and fund issuers, many Web3 protocols still opt for self-custody using on-chain wallets or smart contracts.
BitGo provides insurance for cryptocurrencies against certain instances of loss or theft. Source: BitGo
In a related note, BitGo pointed out that Web3 protocols often piece together various elements—such as non-custody wallet solutions, distribution smart contracts, and custodial services—resulting in “unnecessary pain and complexity, along with gaps in security, compliance, and transparency.”
The platform from BitGo is designed to manage a range of operations, including “token vesting, unlocking, and distribution,” as well as “staking, liquidity management, and even tax reporting.”
While self-custody reduces reliance on centralized intermediaries, it also brings its own set of risks, such as cybersecurity breaches and potential internal misconduct. For instance, on September 16, the decentralized finance (DeFi) protocol Delta Prime suffered a hack resulting in a loss of at least $6 million in virtual assets. In a related incident, the DeFi protocol BaseBros Fi vanished after allegedly siphoning off user funds via an unaudited smart contract.
BitGo states that cryptocurrencies in its custody are insured up to $250 million “against loss, theft, and misuse in situations where we hold all keys,” as indicated on their website. Cybersecurity insurance has become a standard feature among regulated crypto custodians in the U.S.
New York-regulated virtual currency businesses. Source: NYDFS
On August 14, Cointelegraph reported that Fireblocks, known for its self-custody solutions, received a charter to operate as a regulated crypto custodian for U.S. clients.
The U.S. Securities and Exchange Commission has been tightening its oversight of crypto investment managers that do not comply with regulations requiring client funds to be held by qualified custodians, such as registered broker-dealers or banks.
Through the BitGo New York Trust Company, BitGo is among several firms—including Coinbase Custody Trust, Fidelity Digital Asset Services, and Paxos Trust Company—authorized by the state of New York to provide custody services for cryptocurrencies on behalf of U.S. clients.
Magazine:
Bitcoin ETFs may face hacker threats, Ellison seeks no prison time, and more: Hodler’s Digest, Sept. 8–14