BitGo unveils all-in-one custody platform for Web3 tokens amid rising DeFi risks

BitGo, a cryptocurrency custodian, has unveiled a new regulated platform specifically designed to manage and custody native tokens for Web3 protocols. This platform allows crypto-native organizations, such as foundations and protocols, to manage native tokens programmatically. It facilitates the distribution of these tokens to investors, employees, grant recipients, and other stakeholders.

Some protocols already benefiting from the service include Worldcoin, LayerZero, Sui, and ZetaChain.

While regulated digital asset custodians are gaining popularity in the U.S. among investment managers and fund issuers, Web3 protocols typically manage tokens through self-custodied on-chain wallets or smart contracts.

BitGo’s new platform aims to simplify custody and address risks of self-custody

BitGo suggests that when you combine non-custodial wallet options, smart contracts for distribution and separate custody providers can result in “unnecessary challenges and complications,” which could cause security issues and gaps in meeting standards for compliance and transparency measures.

BitGo’s token management platform is designed to handle a range of functions, including token vesting, unlocking, distribution, staking, liquidity management, and tax reporting.

Self-custody reduces reliance on centralized intermediaries but comes with its own risks, such as cybersecurity vulnerabilities and internal misconduct. Recent incidents highlight these risks: on September 16, the DeFi protocol DeltaPrime was hacked for at least $6 million in assets, and the DeFi protocol BaseBros Fi vanished after exploiting user funds through an unaudited smart contract.

BitGo’s $250M crypto insurance boosts security amid U.S. regulatory crackdown

BitGo offers insurance coverage of up to $250 million for crypto held under its custody, protecting against loss, theft, and misuse when it holds all the keys. Cybersecurity insurance is a standard practice among regulated U.S. crypto custodians.

As of August 14, Fireblocks, known for its self-custody solutions, had received a charter to act as a regulated crypto custodian for U.S. clients.

The U.S. Securities and Exchange Commission (SEC) has been increasing its scrutiny of crypto investment managers to ensure they adhere to regulations requiring client funds to be held by qualified custodians, such as registered broker-dealers or banks.

Through BitGo New York Trust Company, BitGo is among several U.S. firms, including Coinbase Custody Trust, Fidelity Digital Asset Services, and Paxos Trust Company, that are chartered by the state of New York to provide crypto custody services for U.S. clients.

The one-stop crypto asset management platform’s debut comes just a few days after digital asset exchange-traded fund issuer 21Shares selected BitGo as a custodian for its U.S. Spot ETFs. BitGo will be the custodian for 21Shares ARK Bitcoin ETF and Core Ethereum ETF.