Bakkt Buys Custodian, Signs BNY Mellon Amid Quest For Legitimacy

The COO of cryptocurrency platform Bakkt, Adam White, today shared a series of exciting announcements on his official Medium blog as the company expects to win approval soon to serve clients requiring a custodian that meets stringent US standards for guarding crypto assets.

Firstly, the former Coinbase executive announced the acquisition of Digital Asset Custody Company (DACC), which provides cryptocurrency custody solution for institutional investors and token issuers holding digital assets.

The takeover should help Bakkt secure the NY regulator’s approval to operate as a so-called ‘qualified custodian.’ The qualified custodian designation, which firms like Coinbase, Gemini and Paxos also have, helps Bakkt lure more-established firms to its pending trading venue.

DACC already provides custody solutions for more than 100 Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term and serves institutions like hedge funds, private equity firms, family offices, and sovereign wealth funds.

Bakkt’s move follows similar acquisitions by US cryptocurrency operators, including Coinbase which said earlier last year that it’s buying a broker-dealer to offer customers Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned). In this sense, blockchain is immune to the manipulation of data, making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tamp Read this Term-based securities. The acquisitions put these companies on a firmer regulatory footing with the US regulators and position them to offer a broader range of crypto-based financial products.

It’s a game changer

Secondly, Bakkt also announced it has partnered with BNY Mellon to offer “geographically-distributed storage of private keys secured by the bank.”

In essence, BNY Mellon’s traditional role as a custodian of assets could enable Bakkt to meet federal regulations that require brokers, exchanges, and others to store investors’ assets with institutions like Bank of New York.

Consequently, BNY and Bakkt are trying to set up a crypto-custody service, under which the Wall Street bank’s history of safeguarding the assets of institutional clients could be leveraged to store Bakkt’s digital assets.

The news comes as a number of other cryptocurrency startups gain regulatory approval to offer custody services, including BitGo, Northern Trust and Prime Trust, among others.

Bakkt’s wallet product purportedly utilizes a range of security measures, including “on-chain and off-chain security measures to safeguard cryptographic keys,” “both warm and cold wallet architecture to secure customer funds” and “layers of automated controls including multi-factor authentication, destination address whitelisting, and role-based permissions.”

Finally, Bakkt confirmed previous reports that it applies for the BitLicense from the New York state regulator as CFTC concerns over its physical Bitcoin custody services is causing it to delay time and again.