Crypto custodian BitGo has announced the launch of an off-chain clearing and settlement service for institutional investors.
The service is designed to address current crypto custody market structure issues, such as counterparty risk, inefficient capital allocation, compliance infringement and security risk, through holding digital assets in cold storage – the generation and storage of private keys in an offline environment – while trades are settled off-chain.
BitGo will offer the clearing and settlement services to over-the-counter (OTC) desks, single dealer platforms, exchanges, asset managers, and broker-dealers, whereby all participants custody their digital assets with BitGo Trust Company.
As a result of using a common custodian, participants will be able to choose which partners to clear and settle with, and check their trading limits pre-trade, according to the firm.
“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 Mike Belshe, CEO of BitGo. “We are bringing to market a riskless, efficient, and compliant digital asset clearing and settlement, and what makes this service possible is BitGo Trust’s strong client base.”
Earlier this year, BitGo partnered with OTC digital currency trading firm Genesis Global Trading to provide BitGo Trust’s institutional clients gain access to Genesis’ crypto liquidity via its network of trading partners.