Crypto custody firm Bitgo is launching a Crypto-as-a-Service (CaaS) platform designed to help financial institutions integrate digital asset trading into their offerings. The platform enables banks and fintechs to incorporate crypto capabilities using Bitgo’s wallet infrastructure and APIs.
Like most as-a-service platforms, the solution is designed to be modular and turnkey.
Given the regulatory environment, risk and compliance remain top priorities for financial institutions evaluating new technologies. Bitgo’s platform includes Know Your Customer and anti-money laundering tools and is designed to meet banking compliance standards.
“I think one of the reasons why this is so significant is that through modular APIs, it reduces the need for extensive in-house development and expensive setup for infrastructure,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “It includes regulatory compliance and even insurance coverage, and allows institutions to tailor their platform’s features to clients’ specific needs—which should allow for quick rollout/scalability. “
“FIs need to evaluate the interest/demand for crypto services among their clientele to determine opportunities to best utilize BitGo’s services,” he said.
Increasing Interconnectedness
This news follows a trend of increasing interconnectedness between traditional financial institutions and the crypto industry.
Digital assets firms have adopted functions once reserved for financial services companies, and Bitgo, Coinbase, Circle, and others have even considered pursuing bank charters in the U.S. Obtaining a bank charter would allow crypto companies to offer loans and accept deposits.
What’s more, Circle announced it would launch a cross-border payment network aimed at rivaling the worldwide rails of Visa and Mastercard.
Increased Investment
Even as crypto firms have emulated banks, more financial institutions have been investing in digital assets technologies. For example, the efficiency and security of blockchain make it a prime candidate to underpin mainstream financial services—not just cryptocurrency.
Blockchain also enables the tokenization of real-world assets like property deeds and stocks. Tokenization has become a central focus for financial institutions because it can streamline processes that are currently manual and expensive.
Perhaps most of all, stablecoins have factored into many financial companies’ strategies, as they offer the benefits of crypto without the volatility. For this reason, PayPal launched its PYUSD stablecoin, Stripe has one in development, and Meta is considering one of its own.
In addition to investing in the technologies, more financial institutions are acquiring or investing in crypto companies. For example, Stripe’s stablecoin launch was made possible by the $1.1 billion acquisition of Bridge.
In one of the earlier examples of this trend, investment banking giant Goldman Sachs made a substantial investment in Bitgo seven years ago.
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