Digital asset merchant bank Galaxy Digital has teamed up with cryptocurrency derivatives and custody firm Bakkt Warehouse to provide institutional investors and asset managers with “white-glove service” as they buy and store bitcoins in order to build trading positions.
The two New York-based firms will collaborate to offer clients looking to invest in physical bitcoin “the same caliber of market knowledge and trade execution expertise in BTC as they would expect from any established traditional finance desk,” said Tim Plakas, head of sales at Galaxy Digital Trading, in a June 10 announcement. “Galaxy provides that, while Bakkt delivers the high level of regulatory-compliant security required for storing digital assets.”
The partnership came about because of “the uptick in demand our two firms have received from traditional asset managers seeking access to physical bitcoin,” Plakas said.
Indeed, a poll of 800 institutional investors released on June 9 by Fidelity Digital Assets found that nearly 80% were interested in digital assets, and more than 60% have already purchased this asset class.
Peace of mind
“Together, Galaxy Digital and Bakkt offer a safe, efficient, and well-regulated route into physical bitcoin access, one that has been already proven successful in the macro hedge fund space,” Plakas added. “Asset managers and hedge funds considering this service can be assured by the high standards we hold as a publicly-traded company with audited, public financial statements and an institutional-sized balance sheet.”
GDT sources liquidity from more than 30 exchanges and providers, and “provides sophisticated trading strategies spanning spot trading, lending, derivatives and structured products,” the release said. The firm traded more than $1 billion in bitcoin and other cryptocurrencies in the first three months of 2020.
“Alongside our adoption of safekeeping requirements that are unique to the digital asset class and its infrastructure, the Bakkt Warehouse uses the same best-in-class, trusted enterprise security framework that protects ICE’s dozen exchanges around the world, including the New York Stock Exchange,” said John Conneely, head of custody business development at Bakkt.
Bakkt is owned by Intercontinental Exchange, better known as ICE, which is the parent of the New York Stock Exchange. Bakkt has undergone a SOC 1 Type I examination by KPMG, and Bakkt Warehouse passed a SOC 2 Type II examination of ICE’s infrastructure by PwC, the release said. Bakkt Warehouse’s hot and cold wallets are covered by a $125 million insurance policy, and insurance giant Marsh can provide customers up to $500 million in additional coverage.
In a webinar discussing its poll, Ria Bhutoria, director of research for Fidelity Digital Assets, said “SOC audits are commonplace among traditional financial services and tech firms… we think it gives investors another level of assurance in this space.”
The same applies to insurance, she added.