The first digital money hosting service in the United States was approved

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Following the approval by the US Supervisory Authority of the stable currency Gemini Dollar and Paxos Stadndar, the Block Chain Technology Services Company BitGo has recently been approved to provide encrypted asset custody services for institutional customers.

Shahla Ali, BitGo's chief compliance officer and attorney general, said the company spent a lot of effort in 2018 trying to set up a regulated custodian entity, and BitGo Trust was approved by the South Dakota banking department, which meant it would soon be able to provide an encrypted asset custody solution for institutional clients under U.S. supervision.

It should be said that the digital asset trusteeship service under the US government's strong endorsement of credit has opened a door to safe investment for Wall Street. Mike Novogratz, a Bitcoin billionaire, has previously pointed out that the institutional capital generated by the custody business could bring Bitcoin back to its former glory and that within a year the digital money capital market will be valued at $800 billion.

Giant layout digital money hosting business

The current traditional asset management industry is facing a new shuffle and huge regulatory pressure challenges, we are looking for a way out. In recent years, with the rapid expansion of block chain assets, this provides a very attractive and widely applicable diversification strategy for professional funds. In order not to miss the historical opportunity of block chain development in the future, the willingness of large funds to allocate digital assets is very strong.

In addition, according to the US Securities Regulatory Commission, institutional investors with a customer asset value of more than $150,000 must deposit their assets in a "qualified custodian". These qualified custodians include banks, savings institutions, registered brokers, futures commissioners and foreign financial institutions.

Nevertheless, the uncertainty of encrypted currency regulation and the risk of private key leaks in digital currencies have made investors sigh.

In order to meet the actual or expected needs of these investors, it is the general trend for traditional institutions and exchanges to provide custody services.

Outside the US, digital money hosting business is nothing new.

In November 2017, Singapore Bank, South Korea's largest financial institution, announced the launch of custody business, mainly for institutional investors.

In March of this year, Grayscale Investment announced the launch of four new investment products, such as BCH, ETH, LTC and XRP.

In May, Nomura Holdings and Global Advisors, the digital money companies that co-founded a trust consortium called Komainu, are inviting hedge funds, family offices and an investment management company to conduct in-house tests.

For the U.S., several Wall Street giants are also exploring digital hosting services, including Bank of New York Mellon, JPMorgan Chase and Goldman Sachs.

In early July, Encryption Exchange and Wallet Provider Coinbase announced a digital asset custody solution for institutional investors. Their custody services will be guaranteed by independent brokers and electronic clearing that meet SEC requirements.

In early August, media reports revealed that Goldman Sachs was considering a plan to provide hosting services for the encryption fund. The move is interpreted to pave the way for more investors to invest in the asset class.

Why is BitGo trusteeship so concerned?

First of all, this is the first compliance license granted to the national regulatory authorities in the United States.

The biggest risk of block chain assets investment is policy supervision. The uncertainty of regulation is sometimes fatal to digital money business.

After the 94 policy was announced last year, due to regulatory policy, the momentum of the development of cloud coins had to make a decision to close the trading of cloud coins.

In order to make a comeback, Li Xiaolai Weibo later said: Cloud coin closed trading, will continue to submit asset custody services.

What is the situation after a year?

On July 16 this year, Cloud Coin Network issued a notice requiring all users to withdraw all assets to the Cloud Coin Network on August 31, 2018, and Cloud Coin Network closed the website permanently, including its "hosting business" function.

The case of cloud coins shows that hosting digital currencies on platforms without regulatory approval is risky for investors.

The official approval of the most powerful U.S. regulator in global financial regulation means that Bitgo will be subject to regular scrutiny of its customers (KYC) and anti-money laundering (AML), as well as financial audits and monthly disclosure. US regulators will ensure transparency and openness in BitGo business and finance.

Of course, all formal digital money trustees claim to have introduced third-party auditors for financial and KYC, AML reviews, but note the difference between third-party auditors and national endorsements of credit.

Through the custody services provided by the state's strong endorsement BitGo, institutions will remove barriers to policy regulatory risk and dare to allocate higher ratios of money in digital money.

Digital money trusteeship is professional.

Compared with physical assets such as gold and precious metals, digital money is a special asset, and private key is the only digital asset certificate. The storage of large funds and private keys involves many complicated measures such as technology and management. It is a systematic project.

Because online storage of digital money is vulnerable to hackers and has a weak liquidity in offline storage, existing hosting solutions will combine the two, such as insurance inventory storage, a large amount of money will be stored offline, users need a private key to access these assets, users need multiple signatures to obtain the key, or It is divided into many pieces and stored in insurance vaults all over the world.

For digital money trustees, technical precautions are the first layer of protection, while the daily security management of trusteeship operations, such as personnel management of contacting the core private key, personnel management of important positions, double management and review of contacting the use of the private key, job rotation and other management mechanisms, as well as daily internal inspection and audit, are Important means to protect the security of digital money hosting.

Therefore, technical service capability and risk management level are one of the most important indicators for investment institutions and U.S. regulatory authorities to examine digital money custody institutions.

BitGo, a block chain security platform, was founded in 2013 by Mike Belshe, a former Google engineer. The company has raised $12 million in round A financing, with Red Point Ventures, a venture capital firm, as its main investor. In round B financing, the company received another $42.5 million in 2017, led by Valor Equity Partners and followed by DRW, a Chicago trading company.

The BitGo leader, who is also an opinion leader on the development of the Bitcoin industry, has made a number of influential comments on issues such as Bitcoin bifurcation. BitGo also has a number of block-chaining technologies in common use, such as the invention of the BitGO "multi-signature" ("2-of-3 key" multi-signature), in which users need at least two or three confirmations to secure the assets of Bitcoin holders.

In 2013, BitGo launched the security service, which was the first multi-user, multi-signature security solution for bitcoins. In addition, BitGo also provides technical development services for the British Mint's gold block chain platform.

In order to seize the big fat of digital money hosting, BitGo bought Kingdom Trust as early as January 2018. At that time, Kingdom Trust was a digital asset trustee and its storage assets valued at about $12 billion.

The first domestic digital money escrow licence is significant, and BitGo has a number of competitors, including the Goldman Sachs giant and the twin stars that have just secured a stable currency issue, who have already submitted applications for a custody service. But from the innovative capabilities and working experience of digital asset security technology, BitGo undoubtedly has an absolute advantage.

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The first domestic digital money escrow licence is significant, and BitGo has a number of competitors, including the Goldman Sachs giant and the twin stars that have just secured a stable currency issue, who have already submitted applications for a custody service. But from the innovative capabilities and working experience of digital asset security technology, BitGo undoubtedly has an absolute advantage.