Nov 10, 2020 at 02:00 UTC
Crypto market maker Amber Group will service its clientele of institutional traders with the help of BitGo Trust, the custodial arm of the Palo Alto-based security firm.
BitGo’s status as a qualified custodian should draw more high-net-worth investors to Amber from places like Hong Kong, Taiwan and Seoul, the companies said.
The Hong Kong-based market maker, which has an average daily trading volume between $100 million and $200 million, is building on its existing business relationship with BitGo. (Amber Group’s suite of offerings, which includes Amber Pro and Amber App, have used BitGo security tech since 2018.)
Back in February, Amber closed a $28 million funding round led by Paradigm and Pantera Capital and including Coinbase Ventures. BitGo Trust clients include Pantera, Bitstamp, Nexo, CoinJar and others.
Amber’s decision was partly swayed by BitGo’s $100 million in Lloyd’s of London–backed cold storage insurance cover, said BitGo’s Nick Carmi.
“The insurance that comes with our trust custody just adds another component of security and trust for the clients – and that’s why they are with us,” Carmi, the custodian’s head of financial services, said in an interview.
Asked for his reasoning on the broadening of the firm’s custody partnerships, Amber Group CEO Michael Wu said via email that it came down to the custodian’s “track record, shared insurance scheme and integration with [the BitGo] lending desk.”
Some custodians claim that deep cold storage, which involves some degree of manual processing to get the funds online, is not suitable for the sort of fast turnaround professional trading operations require.
BitGo’s Carmi said the inventory immediately needed for market making and high-frequency trading can be held in hot wallets, or those connected to the internet. “Whatever they are not using stays in cold storage,” he added.
Wu could not comment on the exact breakdown of funds that sit in Amber’s cold wallets at any one time.
“The majority of funds are always being utilized and moved around for various trading, lending and other activities,” said Wu. “Our engagements with new custody partners are driven by business demand as the firm continues to grow.”
Amber has also been getting a taste of BitGo’s wrapped bitcoin (WBTC), a tokenized version of bitcoin (BTC) primed for easy usage on Ethereum’s various decentralized finance (DeFi) apps.
BitGo’s Carmi said WBTC naturally flows into the institutional custody business as savvy investors hunt for yield.
“We are the sole custodians and the only counterparty that can mint WBTC,” he said, “and BitGo Trust is the custodian of the BTC that’s being held for minting.”
Wu could not comment on the volume of WBTC Amber is trading. “We only began trading WBTC recently, primarily as a result of DeFi opportunities,” he said.