- Institutions investing in cryptocurrencies can now enjoy secure trading directly from their custodial accounts with BitGo via API, thanks to a partnership with SettleBit.
- BitGo is now using SettleBit’s digital settlement infrastructure to enable automatic cryptocurrency trading directly from its insured user accounts
Institutions investing in cryptocurrencies can now enjoy secure trading directly from their custodial accounts with BitGo via API, thanks to a partnership with SettleBit. BitGo is now using SettleBit’s digital settlement infrastructure to enable automatic cryptocurrency trading directly from its insured user accounts. The first trade was successfully concluded by CMT Digital on January 22 for a value of $100,000, paving the way for a new way of institutional trading in the future.
BitGo is a longtime leader in the digital asset custodial space. However, competition has become much more heated over recent years, with several new players, including exchanges like Coinbase and Gemini, entering the space. So, existing players need to raise their game.
To date, a critical challenge for custodians has been a lack of functionality for trading between user accounts across custodians. The only way to settle a trade is to revert to the traditional method, which means using a clearing house to serve as an intermediary, offsetting counterparty risk. While tried and tested, this method totally negates any of the benefits of peer-to-peer trading, including real-time settlement.
Now, BitGo has responded to market demand by teaming up with SettleBit, a firm founded by Leor Tasman, the founder of Prycto - who already has a track record of working with leading exchanges, including Coinbase, Binance, and Gemini. SettleBit platform now provides BitGo users with an immediate price offer to buy or sell digital assets and trade with instant settlement. Furthermore, there’s no counterparty risk, as all of the funds used for trading are held in cold storage.
Blazing a Trail for Institutional Investors
This isn’t the first partnership of its kind. Last year, BitGo announced it was partnering with Genesis to provide an almost identical service. However, nothing concrete yet appears to have emerged from the partnership.
For this reason, BitGo and SettleBit having now announced the successful settlement of a live trade makes the partnership announcement that much more tangible. It also provides institutions with the assurance that the first move has already happened, meaning others may now have the confidence to step into direct, automated trading from their BitGo accounts in future.
While this is the first time that BitGo has been able to confirm it can offer such a trading service from its custodial accounts, it’s not unprecedented in the digital asset space. At the end of 2018, institutional trading platform OTCXN announced it was adding custodian Kingdom Trust to its network. Late last year, OTCXN confirmed it was expanding its custodian network by adding Aegis Custody.
The market for cryptocurrency custodial services is set for huge growth as more and more institutions enter the space. Some have even predicted that the existing banks will ultimately start to offer custodial services, with one report even suggesting that this may emerge in the German banking sector this year. Institutional interest in cryptocurrencies has been increasing rapidly, particularly with the entrant of new regulated platforms such as Bakkt.
Therefore, a corresponding interest in crypto custodial services seems likely. Institutions cannot rely on keeping their funds in exchange accounts or on using retail-standard cold wallets. So far, BitGo has been a trailblazer in this sector, so perhaps this most recent development means its competitors may also ultimately decide to follow suit in offering direct trading.