BitGo, a prominent crypto custodian, is set to unite with Genesis Global Trading, an over the counter (OTC) company, to make institutional players from Wall Street more keen to invest in cryptos. The partnership will let institutional investors store their assets with BitGo and then make trades on the Genesis platform, which will be faster.
This announcement was originally made today, January 16, and it will help to protect the assets of the customers at the same time that they are easy to move.
The whole idea is to unite the speed of one company and the easiness of the other one to create a feeling that the traders already have when trading in the traditional stocks markets. The partnership will make things faster because the two companies will be in constant communication during all times.
For instance, if a client wants to sell Bitcoin in its BitGo wallet, which is kept in cold storage, he can just use Genesis to do it. The money will be locked up as soon as the trade is confirmed and the companies will make the rest of the transaction by themselves.
This is a very different way of how things go in “traditional” Bitcoin trades as all the process is made by the trader. Institutional investors are generally interested in speed and in being protected, and by doing all by themselves, they have more risks, so the partnership will ease this problem.
In this case, the transactions will not even need to be recorded in the digital ledger because they will be trades between the assets stored in the company and will be made via bank wires instead of using the blockchain.
The CEO of Genesis Trading, Michael Moro, the assets never actually leave BitGo. The company keeps the records of who has which asset and they just trade their official ownership without ever having to get away from the safe cold storage that the company offers. It is a model that is more akin to Wall Street than most common blockchain trades are.
According to the people from the companies, this solves two problems. In the first place, it takes all the slowness of cold storage away. Then, it makes OTC trades easier. In a traditional OTC trade with Bitcoin, people have to send huge amounts of Bitcoin and this is not safe. By doing the process like this, it is far safer than to simply send the money.
This way, the CEO of BitGo, Mike Belshe, believes, nobody has to sacrifice the safety of cold storage in order to actually trade assets fast. The transfers will be all internal and without any risk of being hacked.
Other Companies Following The Trend
BitGo is certainly not the only one that decided to follow in this direction. Everybody is interested in the money from the big Wall Street players, so a lot of companies are trying to create an environment that will attract these investors.
Last year, Kingdom Trust and OTCXN, two companies which are very similar to BitGo and Genesis Trading, respectively, decided to follow a similar idea. People store their assets in Kingdom Trust and then use the private blockchain of OTCXN to trade. All the money never goes out of cold storage and it is easy to trade it.
OTCXN has even started a new partnership with Prime Trust, which expanded the possibilities of using two cold storage solutions.
During an interview with Coindesk, Rosario Ingargiola, the CEO of OTCXN, has affirmed that all the trades are made off chain. They are a lot like the Lightning Network, he affirmed and took his time to make a jab at the technology adding that the main difference is that their system actually works.
Fidelity Investments, one of the largest investment companies in the world is also using its Fidelity Digital Assets custodian to make a similar service. The idea is to cross clients from their own books so the transactions are easier to make and more efficient. In the future, if the trend continues to keep strong, the speed of the settlement will be a non-issue for the traders.
According to Matt Johnson, co-founder of Digital Asset Custody Company, the idea is to never actually need to use hot wallets in the future and only move the money inside the company. People will trade it always in cold storage and can use institutional custody instead of hot wallets forever.
Taking USD Out of the Equation
An important part of the plan is to take USD out of the equation by using stablecoins. Stablecoins, which are very popular at the moment, could be a good way to trade instead of using a layer 2 system. Both Genesis and BitGo, if they decided to use the same stablecoin, could not even need to use USD anymore.
This would be also important because all transactions could be made 24/7 instead of having to use bank hours to actually settle the money.
However, there is still a long way before huge banks will finally decide that it is a good idea to go fully digital, so stablecoins will probably not take the place of fiat for a long time yet.
About Genesis and BitGo
Genesis Global Trading is a subsidiary of the Digital Currency Group, which is a global company. It was actually the first company to acquire a BitLicense for working in the New York state, which was a very big deal. The company is registered with the U. S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
BitGo was founded in 2013 and it is a company focused completely on the digital world. It is based in California and operates as a crypto custodian.