Blockchain security firm BitGo has entered a partnership that will allow its clients to trade cryptocurrency assets that are held in its custody.
The partnership with over-the-counter exchange Genesis Global Trading will allow BitGo clients to trade their digital assets without having to move them from the custody service to a crypto exchange. Under the partnership, Genesis will execute the trades without requiring BitGo’s clients to open new accounts.
BitGo’s clients will access the service at no extra fee. Genesis Global Trading will make money by pocketing the bid-offer spread or the difference between the buy and sell rates.
According to the CEO of BitGo, Mike Belshe, the service will come with the same security and safety guarantees:
Some custodians are choosing to sacrifice security and safety by enabling fast withdrawals from cold-storage which makes their clients more susceptible to hacking, false instructions, and theft. Our partnership with Genesis, a FINRA and SEC regulated company, gives our clients access to liquidity through Genesis’ robust network of trading partners. And that solves the real problem which is the need to access liquidity - not the need to speed up withdrawals.
Per the CEO of Genesis Trading, Michael Moro, institutional crypto investors and large traders prefer over-the-counter markets because of the deeper liquidity available. Additionally, hacking risks discourage them from using exchanges. As previously reported, blockchain security firm CipherTrace estimated that in the first three quarters of 2018 cryptocurrencies worth nearly $1 billion were stolen.
Another advantage that users of the service can expect to enjoy by trading their digital assets while in cold storage is more predictability with regards to prices. Currently, there is a risk that prices could move against investors when they are loading their digital assets to the hot wallets of crypto exchanges. Usually, this is a process that takes a day or two, according to Bloomberg.
This comes a little over four months since BitGo received U.S. regulatory approval to provide crypto custody services.
At the time of getting the approval, Belshe stated that crypto custody services would help lure institutional investors into the digital asset market, as CCN reported:
This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it, family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated […] This is early stages in an industry that’s volatile right now. We’re in a down cycle in terms of where we’re going, but the institutions see an opportunity. It’s going to progress quickly.
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