Palo Alto-based BitGo, one of the cryptoeconomy’s largest digital asset services firms, just made a decisive pivot toward the mainstream.
On February 18th, BitGo announced that it had acquired Harbor, a tokenized securities platform that’s counted major venture capital firms like Andreesen Horowitz among its backers.
The terms of the new deal were undisclosed, but even with specifics aside it will significantly expand BitGo’s in-house capabilities, insofar as Harbor was the first blockchain startup to become approved as a transfer agent by the U.S. Securities and Exchange Commission (SEC) and as a registered broker-dealer by the Financial Industry Regulatory Authority (FINRA).
Accordingly, the acquisition will allow BitGo to add mainstream financial services into its suite of “full-stack” digital solutions, company chief executive officer Mike Belshe said on the news:
“Our vision has always been bigger than wallets and custody and acquiring Harbor furthers BitGo’s vision of building a new digital infrastructure for financial services. We believe participants will ultimately need trusted, full-stack solutions for digital currencies and now BitGo is well positioned to address institutional requirements as the market develops.”
Building a Foundation for Institutional Clients
Notably, the BitGo and Harbor teams are no strangers. In October 2018, news broke that the two firms had agreed to a deal that saw BitGo become the custodian for crypto funds raised by token offerings on Harbor.
“In the same way you want to keep your money in a bank account and not shoved under your mattress, institutions want to make sure their funds are secured,” Harbor CEO Josh Stein said at the time.
This initial collaboration surely helped pave the way for this week’s acquisition deal, a deal that shows BitGo is increasingly willing to open its wallet when it comes to expanding its enterprise service offerings.
Indeed, the purchase marks the firm’s second acquisition in recent months. Last fall, BitGo bought Hedge, a staking infrastructure startup, to leverage their tech for the rollout of BitGo Trust’s Staking Services.
“Our BitGo Trust clients can now generate passive income on their investments while the assets remain in our secure, insured cold storage,” BitGo’s Kiarash Mosayeri said.
Last year, the digital assets financial services company revealed it had locked down $100 million USD worth of insurance coverage from Lloyd’s, a specialist insurance and reinsurance market. The insurance was set to cover holdings that were “100%” held by BitGo or BitGo Trust Company.
Around the same time, the firm revealed its intentions to expand into Europe with new offices in Germany and Switzerland.
“We saw a lot of demand in Europe last year and it was clear that clients there needed to be able to work with European based firms that were regulated within specific jurisdictions,”
CEO Mike Belshe said.
Leave Nothing to Chance
Buying Harbor and securing the startup’s broker-deal and transfer agent statuses is part of BitGo’s strategy to cover its bases.
The U.S. regulatory arena is currently complicated and even paradoxical in some areas when it comes to cryptocurrencies, so having major mainstream financial credentials will allow BitGo to enjoy clarity and compliance while many others in the U.S. are facing known unknowns.
BitGo certainly isn’t reinventing the wheel here, either. Two weeks ago, the Ethereum development studio ConsenSys confirmed that it had similarly acquired a broker-dealer firm, Heritage Financial Systems.
In various ways, it’s easier to buy such firms than it is to navigate America’s regulatory crypto thicket from scratch. That dynamic should remain so long as cryptocurrency rules in the country stay competing and unclear.
With political chatter growing around the need to update these rules, though, it’s possible that further clarity is coming over the next few years.
