Fireblocks’ $133 mn round signals the need for crypto custody
With so many institutional clients getting into crypto, custody has never been more important. This week, Fireblocks raised $133 million in Series C funding. Among those participating in the round were the investment arm of commercial banks – BNY Mellon and Silicon Valley Bank (SVB).
Fireblocks is a direct-to-customer crypto custody solutions provider. While it does not have a product yet, it offers digital assets custody solutions to banks, neo-banks, crypto start-ups, and other financial services companies. They handle clients’ private keys when creating a wallet. This allows an additional layer of security, especially for high-value transactions.
In addition to custody, the platform also provides liquidity. Fireblocks has over 200 trading venues, liquidity providers, and lending desks. This includes 30 exchanges and trading platforms like Bitstamp, FTX, B2C2, etc.
Fireblocks completed the service organization control (SOC) Type II examination by Ernst & Young in December 2019. This underscores the custody platform’s operational efficiency when conducting digital asset transfers. The examination tested Fireblocks’ encryption technology, production environments, cyber-security controls, and disaster recovery service level agreements.
The second layer of security is to prevent illicit transactions. Fireblocks does this by partnering with blockchain analytics companies – Chainalysis and Elliptic. Any transactions that potentially violate know your customer (KYC) or anti-money laundering (AML) rules will be flagged and investigated.
Fireblocks isn’t the only custody solution that the mainstream FinTech world is welcoming. Earlier this month, PayPal announced its acquisition of Curv, a cryptocurrency security and custody company. In October 2020, PayPal allowed customers to buy and hold cryptocurrencies like Bitcoin and Ethereum. The acquisition of Curv supports PayPal’s cryptocurrency ecosystem. Curv, like Fireblocks, allows multi-party computation to secure users’ private keys.
There are companies building solutions like custody and security, insurance, and verification. What this does is move crypto and digital assets away from the ‘wild west’ it was accused of a few years ago. Moreover, real-world financial solutions like lending, borrowing, invoicing, leveraging, and more are being built in decentralized finance or DeFi. Security tokens for real estate and nonfungible tokens for content are already being sold for millions.
Fireblocks and Curv provide legitimacy to an increasingly legitimate financial marketplace. We can expect more funding from mainstream finance and tech in the digital assets space in the future.
The funding at these levels, especially by companies that are traditional banks cannot be missed. It shows how traditional finance is trying to bring crypto and DeFi opportunities closer to their own users. They are investing in some established technology providers, rather than trying to build their own infrastructure.
The merging of crypto and traditional finance will happen relatively quickly, as money will be able to flow easily from one infrastructure to another. It will start with the ability to easily invest in Crypto assets directly from a bank account without having to set up a separate account at a crypto exchange.
From there, it won’t be a far jump to add DeFi features like pooled lending. In Europe, infrastructure providers are already building the rails to integrate protocols like Aave
DeFi protocols are building at hyperspeed. These protocols are to make financial systems efficient. This coupled with technology like Fireblocks will allow for greater adoption from banks using the security of DeFi.
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