Goldman Sachs and Mike Novogratz’s Galaxy Digital Invest in Cryptocurrency Custodian BitGo

News and Analysis

Goldman Sachs Group Inc. and billionaire Mike Novogratz’s Galaxy Digital Ventures have announced they are investing $15 million in cryptocurrency custodian BitGo Holdings Inc.

The investment marks the second close of BitGo’s Series B funding round, with Goldman Sachs and Galaxy Digital joining Valor Equity Partners, Craft Ventures, DRW, and Redpoint Ventures. This brings the total amount raised in this round to $58.5 million. The funding will support BitGo’s development of its $1 trillion crypto wallet, the announcement says.

“This strategic investment from Goldman Sachs and Galaxy Digital Ventures validates both our market opportunity and unique position,” said Mike Belshe, CEO of BitGo. “No one is better positioned than BitGo to serve institutional investors who want to trade cryptocurrencies and digital assets. That’s why we’re focused on figuring out what it takes to secure a trillion dollars. The market’s not there yet but our job is to be ready first.”

Palo Alto, California-based BitGo is the world’s largest processor of on-chain Bitcoin transactions, processing 15% of all global bitcoin transactions, and $15 billion per month across all cryptocurrencies. The company has a customer base that includes the world’s largest cryptocurrency exchanges and spans more than 50 countries, and also has offices in Sioux Falls, London, Singapore, and Tokyo.

“If you were investing in any other asset class, you’re probably not worried about the asset just disappearing, but this one, people still have that fear,” Mike Belshe added. “For cryptocurrencies to reach their full potential, we’ve got to conquer that.”

On his new investment, billionaire Michael Novogratz said:

“Institutional investors are gradually realizing that digital assets are going to be a game changer, and they want to participate. We have been impressed with BitGo’s world-class team, their deep technical understanding of digital assets as well as their ability to deliver institutional-quality products to investors. Our team is excited to support BitGo as it enters into this next phase of growth.”

BitGo has gathered a total of about $70 million in fundraising rounds. The company says it provides services for more than 75 coins and tokens, and that it holds more than $2 billion in assets.

Last month, the company received green light from the South Dakota Division of Banking to act as a qualified custodian for digital assets, meaning it can now offer institutional clients a regulated storage solution for cryptocurrencies.

Goldman’s investment could help the bank develop crypto services of its own. The securities firm was among the first on Wall Street to clear Bitcoin futures introduced late last year. And earlier this year, it named a head of digital-asset markets as it explored ways to help clients interested in investing in crypto.

In August, people with knowledge of the matter said Goldman Sachs was considering a plan to offer custody for crypto funds. But it had yet to set up a full-fledged desk to trade the currencies. Fidelity Investments said on October 15 that it will offer security and storage services, trade execution and customer service for digital assets.

“We believe that a custody offering is a logical precursor to digital asset market making,” Goldman spokesman Michael DuVally said.

The bank made the BitGo investment through its principal strategic investments group, where executives include Rana Yared, a managing director involved in developing Goldman’s crypto plans.

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