Crypto services firm BitGo is shifting its focus to address a long-standing grievance of both the banking and the digital assets world: clearing and settlement.
The Palo Alto firm announced the news at the Consensus conference Tuesday morn...
Crypto services firm BitGo is shifting its focus to address a long-standing grievance of both the banking and the digital assets world: clearing and settlement.
The Palo Alto firm announced the news at the Consensus conference Tuesday morning, in a move that sees BitGo working to become the Depository Trust & Clearing Corporation (DTCC) of crypto.
BitGo has traditionally focused on its flagship custody business, reportedly storing $2 billion in clients’ assets across 100 different coins and tokens. But competition is heating up in the custody world, forcing BitGo to pay attention to underdeveloped facets of crypto trading - including clearing and settlement.
Currently, settling a crypto trade takes place by moving users’ assets into hot storage. But by doing so, the crypto is exposed to risks of a hack or theft (or the buyer may never send the fiat or assets owed). Because the settlement is done on-chain, ownership of the crypto is renounced before users’ secure their payment (or vice versa), hence absorbing any potential loss. Many believe this has been keeping institutions at an arm’s distance.
As such, the likes of Bakkt and Liquidity Offset Network are working to address this gap, but it seems BitGo may beat them to the punch. By adding an Off-Chain Clearing and Settlement (C&S) service to its custody product, BitGo says users’ digital assets will remain safe during any transactions, as it will never leave custody before ownership is settled. In other words, the C&S service acts as a trusted third party, locking up both parties’ funds during settlement. The crypto is only moved on-chain during the withdrawal, by which point it is the new owner’s responsibility.
“Until now, in a digital asset trade, one party needed to assume all of the risk and act on the counterparty’s good faith, and this doesn’t really work for institutional investors,” said BitGo CEO Mike Belshe. “We are bringing to market a riskless, efficient, and compliant digital asset clearing and settlement.”
Notably, the C&S service will only be available to clients of its existing custodian business, adding a competitive edge. They are hoping to offer their services to a client base made up of OTC desks, single dealer platforms, exchanges, asset managers, and broker-dealers.
source https://www.tokentalk.co/The Block/bitgo-ventures-beyond-custody-with-service-it-hopes-will-make-it-the-dtcc-of-bitcoin-5cdacbc1878cd420216ad263
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