Digital Assets: BitGo Flags Off Crypto Lending to Institutions
BitGo wades into the fast-growing business of lending cryptocurrencies.
BitGo is taking the plunge into lending cryptocurrencies to institutions, it announced Thursday. (BusinessWire)
It is one of the oldest and largest custodians of digital assets
“With our lending service, we are melding the best of Wall Street’s sophisticated understanding of how to work with institutional investors and the best of Silicon Valley’s technology and innovation,” said Mike Belshe, CEO, BitGo.
It’s evidently a hot business. According to CoinDesk, digital lender Genesis Trading, owned by the crypto-focused investment firm Digital Currency Group, reported a 21% jump in its crypto lending book during the fourth quarter. Genesis Trading, located in New York, said its lending book ballooned to $545 million.
Decade-long experience
Now Belshe has some experience here, according to the BitGo website. In 2010, he was a kind of pioneer in bitcoin custody. He held coins, both for himself and for Silicon Valley biggies, on an offline laptop stowed under his couch.
No surprises then that he has graduated to custody and lending of cryptos. Besides, his firm BitGo now handles over a fifth of all bitcoin transactions.
BitGo ran the new crypto lending business in beta mode for several months. That worked rather well, it seems. It already has notched up a tally of $150 million in outstanding loans. That’s according to Nick Carmi, a former Deutsche Bank executive who is BitGo’s head of financial services.
“Our goal was to build a lending business that is similar to lending businesses in the traditional financial markets,” said Carmi in the statement. “We are not looking for a high-volume, low-margin business; we are building deep relationships with our clients to drive value for them and to create a long term, sustainable business.”
Institutional focus
Carni has confirmed to CoinTelegraph that the lending service will be focussed for now on institutions only, with no plans to offer it to retail.
Given the target clientele, BitGo has included 15 cryptocurrencies in its lending repertoire.
Carni said: “We started our lending with BTC, and very rapidly expanded into other cryptocurrencies such as ETH, LTC, BSH, DASH, stablecoin, and fiat. Bitgo’s lending services can support over 15 different coins. All of our loans are collateralized, some at above 100% and others at below depending on the coins, the term, and the counterparty credit.”
BitGo invites deposits of cryptocurrencies against interest payment, and lend these deposits out at a higher rate.
“I’m running a matched spread and making a profit on that,” Carmi told CoinDesk. “This is no different from the way banks do it.”
Related Story: Digital Assets: BitGo Goes The Whole Nine Yards; Buys Harbor, Subsidiaries and All
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