BitGo, the leader in digital asset financial services, today published a public letter to the Office of the Comptroller of the Currency (OCC), a branch of the Treasury that supervises national banks and thrift institutions.
BitGo issued the letter in response to the OCC’s recent call for input on how best to accommodate new technology and innovation in the business of banking and its support that a national bank may provide “cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency.”
In the letter, BitGo outlines best practices for the complex and highly-specialized endeavor to custody cryptocurrencies and other digital assets. Below is a short excerpt and a full copy of the letter may be found here.
Excerpt from BitGo’s Open Letter to OCC:
On June 4, 2020 the Office of the Comptroller of the Currency (“OCC”) issued an Advance Notice of Proposed Rulemaking (“ANPR”) seeking input on how best to accommodate new technology and innovation in the business of banking. Additionally, the OCC recently released a statement reaffirming the OCC’s position that “a national bank may provide these cryptocurrency custody services on behalf of customers, including by holding the unique cryptographic keys associated with cryptocurrency.” We are greatly excited by these developments, which we view as a watershed moment for both the U.S. financial system and the blockchain industry. BitGo Holdings, Inc. (together with its respective subsidiaries, are collectively referred to herein as “BitGo”) has been a leader at the forefront of the fusion of these two worlds, which has afforded us with a unique perspective. We believe this is our moment to exercise our voice and answer the call to share our experience with the OCC.
The custody of cryptocurrencies and other digital assets (collectively, “cryptocurrencies”) is, by all measures, a complex and highly-specialized endeavor. Cryptocurrencies are simultaneously intangible digital assets that share qualities of bearer instruments. At its most fundamental level, custody of cryptocurrencies revolves around securing a private cryptographic key required to sign transactions. In recognition of the inherent difficulties in the custody of cryptocurrencies, we believe that most, if not all, national banks should consider the following option from the OCC’s recent Interpretative Letter: “A bank acting as custodian may engage a sub-custodian for cryptocurrency it holds on behalf of customers and should develop processes to ensure that the sub-custodian’s operations have proper internal controls to protect the customer’s cryptocurrency.”
As one of the first custodians of cryptocurrencies, we would like to provide our insight so that the OCC may be able to issue further guidance to national banks on criteria for selecting such a sub-custodian for cryptocurrency. Specifically, we believe than any proper sub-custodian must satisfy all of the following six criteria – each of which work in conjunction with one another to produce a gold standard of protection of customer’s cryptocurrencies:
- Existing Regulatory Oversight and Established Framework for Compliance
- Multi-Signature Cryptographic Technology
- Offline “Cold” Storage of Cryptographic Keys
- Independently Verified System Controls
- Depth and Breadth of Cryptocurrency Experience
- Insurance Policy Covering Third-Party Hacks
BitGo is the leader in digital asset financial services, providing institutional investors with liquidity, custody, and security solutions. In 2020, the company launched BitGo Prime, the first and only integrated solution with lending, trading and qualified custody, as well as BitGo Portfolio and Tax solutions. BitGo Trust Company, the first qualified custodian purpose-built for storing digital assets, was launched in 2018. BitGo processes over 20% of all global Bitcoin transactions, and supports over 250 coins and tokens. BitGo’s customer base includes the world’s largest cryptocurrency exchanges and spans more than 50 countries. BitGo is backed by Goldman Sachs, Craft Ventures, Digital Currency Group, DRW, Galaxy Digital Ventures, Redpoint Ventures, and Valor Equity Partners.
Custody services are currently offered through BitGo Trust Company, a South Dakota chartered trust company. BitGo is not registered with the SEC, and does not offer legal, tax, investment, or other advice. Please consult your legal/tax/investment professional for questions about your specific circumstances.