Prime Trust encountered severe financial difficulties, resulting in an $8 million loss linked to its investment in the failing terraUSD stablecoin. Conversely, BitGo showcased resilience by obtaining $100 million in funding after reevaluating its acquisition plans involving Prime Trust.
BitGo and Swan, both prominent names in the world of Bitcoin financial services, are joining forces with an ambitious goal. They aim to create the first Bitcoin-only trust company in the United States. This partnership aims to combine BitGo’s expertise in cryptocurrency custody with Swan’s recognized capabilities in customer onboarding and fraud prevention.
Swan CEO Cory Klippsten summed up the collaboration’s essence by highlighting their commitment to Bitcoin’s security and integrity. He emphasized their goal of building a custodial service exclusively for Bitcoin, avoiding the risks associated with managing various altcoins within the same trust company. This focus aims to provide a more robust and secure custody solution.
Mike Belshe, BitGo’s CEO, sheds light on their strategic approach. He draws parallels with the well-established models in the traditional U.S. financial sector, emphasizing the importance of separating exchange and custody functions. Belshe believes this model, tried and tested for over a century, is the best fit for the Bitcoin industry.
Set against a backdrop of dynamic partnerships and daring initiatives
BitGo and Swan have a well-established history of collaboration. Swan has consistently relied on BitGo as one of its trusted custodians for Bitcoin storage. Furthermore, Swan has previously partnered with Fortress Trust, a chartered trust company based in Nevada. It’s worth noting that Fortress Trust is in the process of becoming part of Ripple’s expanding portfolio.
In response to this acquisition’s implications, Swan is actively transferring compliance and settlement functions to a new partner. Swan CEO Klippsten explained, “We’ve been integrating with Bakkt since early 2023 and have already started migrating certain customer segments.”
Prime Trust’s turmoil and BitGo’s strategic prowess
This significant joint venture should be seen in the wider context of the crypto-custody landscape. Just a few months ago, crypto custodian Prime Trust faced insolvency. This situation arose after BitGo decided not to proceed with its initial plan to acquire Prime Trust.
To highlight the cryptocurrency industry’s volatility, Prime Trust’s financial troubles became public when its CEO, Jor Law, revealed in a court declaration that the company had suffered an astonishing $8 million loss. This loss was linked to their investment in the terraUSD algorithmic stablecoin, which experienced a sharp decline in May 2022.
In sharp contrast to this setback, BitGo demonstrated resilience and strategic vision. Following its withdrawal from the Prime Trust acquisition, the company successfully secured an impressive $100 million in funding, raising its valuation to a remarkable $1.75 billion.
Expectations and Possible Challenges
The BitGo-Swan joint venture faces several challenges, primarily dependent on regulatory approvals. In an evolving crypto landscape increasingly entwined with traditional finance, regulatory compliance is of utmost importance. Stakeholders and regulators will closely monitor this venture, as its success may serve as a precedent for other Bitcoin-focused initiatives.
This bold collaboration between BitGo and Swan represents a potential shift in the Bitcoin custody sector. As they work toward realizing their vision of a Bitcoin-only trust company, the entire industry watches closely. If successful, it could usher in a new era of specialized, secure, and efficient Bitcoin financial services.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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