Investors Bet Billions on Crypto Custody Providers

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Crypto asset custodians are attracting billions of dollars from investors betting that the influx of Wall Street players into digital markets will lead to increased demand for custody services.

Fireblocks became the highest-valued crypto asset custodian on Thursday after raising $550 million in a new funding round that put $8 billion on the company. The figure matches the valuation achieved by FTX, one of the world’s largest crypto trading exchanges, which announced a $400 million funding round on Wednesday.

Fireblocks has secured new investment from a group of venture capital firms, including D1 Capital Partners and Spark Capital. The deal comes after private investors poured $4.5 billion into digital asset custodians last year, representing a fifth of the total capital that was invested in the blockchain industry in 2021. , according to research by Blockdata.

The influx of capital stems from expectations that large professional investors will strengthen their presence in the digital asset space, fueling a market for lending, borrowing and other business activities that require crypto tokens and coins to move. safely.

Investors have also been pouring money into the broader blockchain industry as the abundance of private capital trickles into the rapidly growing industry.

Custody is a key service for professional investors to access digital markets, and total assets under custody have grown rapidly over the past few years to reach $223 billion as of January this year, according to Blockdata.

Crypto custody providers initially focused on the custody and storage of assets such as bitcoin. But as the market has grown, custodians have evolved to act as security guards for assets moving in the digital world, protecting coins and tokens from hackers and ensuring that funds are safe. safe and get where they need to be.

Coinbase and PayPal are just two of the companies that have recently acquired custodial service providers, as part of an expanded offering for professional investors.

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To date, Fireblocks has managed $2,000,000,000 of assets that have changed hands across 20 blockchains and 1,000 cryptocurrencies that have made their way into commerce, games, and other digital pathways such as tokens. not fungible.

The company doesn’t report earnings numbers, but according to Blockdata, its annual revenue grew 350% in 2021. Other major custodial providers have also seen significant growth, with Blockdata saying Genesis and Ledger seeing significant growth. double-digit increases in assets under custody. , while BitGo’s $64 billion in assets represents a 492% increase since December 2020.

Along with large cash inflows, figures in traditional finance and politics have turned to companies that act as gatekeepers to the digital world. Former UK Chancellor Philip Hammond joined London-based Copper, one of the biggest crypto custody providers, last year.

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