Valkyrie’s spot Bitcoin ETF adds BitGo as a second custodian Valkyrie’s spot Bitcoin ETF adds BitGo as a second custodian
The same fund will simultaneously rely on Coinbase for custody.
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Updated: Feb. 1, 2024 at 11:01 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Vaklyrie Investments and BitGo have entered into a custodianship agreement, according to an announcement from the latter company on Feb. 1.
Mike Belshe, CEO of BitGo, said:
“… [Valkyrie] took a new step forward with their newest ETF to help investors around the world get access to Bitcoin. It’s a privilege to be their custodian to support their product. We aim to demonstrate the value in private custody solutions to drive the next wave of adoption.”
BitGo’s announcement otherwise indicated that ETF issuers such as Valkyrie must secure their digital assets with qualified custodians, adding that this requirement is critical to U.S. regulators and to the ETF industry globally.
Though BitGo did not specifically identify the ETF in question, current filings show that the partnership relates to the Valkyrie Bitcoin Fund (BRRR).
The agreement between the two firms, as filed with the U.S. Securities and Exchange Commission (SEC), explains BitGo’s custodial role more thoroughly. BitGo will maintain one or more custody accounts to handle the receipt, safeguarding, and maintenance of digital assets and fiat currency. It will also segregate funds and avoid commingling of funds unless requested by Valkyrie.
The agreement additionally says that BitGo will provide Valkyrie with wallet software and non-custodial wallet service, fiat services, and API access. It notes that the services are not intended for third-party payments.
Valkyrie will continue to rely on Coinbase
One section of Valkyrie’s 8-K filing indicates that its agreement with BitGo will not replace Coinbase as Valkyrie’s ETF custodian. The filing reads:
“The Trust’s existing custody arrangement with [Coinbase] is unaffected by the entry into the Agreement. The Sponsor anticipates utilizing the custodial services of both Coinbase and BitGo to custody the Trust’s bitcoin.”
Bloomberg ETF analyst James Seyffart called the latest development a “diversification’ of Valkyrie’s custodians, noting that Valkyrie and other spot Bitcoin ETF providers only had one custodian at launch time.
Bloomberg charts indicate that eight of eleven spot Bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust (IBIT), initially relied on Coinbase as a custodian. The exceptions are the VanEck Bitcoin Trust (HODL), which instead relied on Gemini, the Hashdex Bitcoin ETF (DEFI), which instead relied on BitGo, and the Fidelity Wise Origin Bitcoin Trust (FBTC), which relied on Fidelity.
Coinbase is also involved with several spot Bitcoin ETFs through surveillance-sharing agreements, a role that is separate from custody.
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Mike Dalton
Before transitioning to crypto writing in 2018, Mike studied library and information sciences. Currently, he resides on Canada's West Coast.
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Bitcoin, a decentralized currency that defies the sway of central banks or administrators, transacts electronically, circumventing intermediaries via a peer-to-peer network.
Valkyrie
Valkyrie Investments is a specialized alternative asset management firm at the intersection of traditional finance and the emerging digital asset sector which is headquartered in Nashville.
BitGo
BitGo is a market leader in institutional-grade cryptocurrency investment services, providing institutional investors with security, compliance, and custodial solutions for blockchain-based currencies.
Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.