Bitcoin-only exchange Swan has announced a partnership with BitGo to launch a Bitcoin-only trust company. The company would require regulatory approval before going live for users.
The announcement allows Swan Bitcoin to showcase how Bitcoin on its exchange will be held in custody in the future.
Swan Bitcoin transitioned from Prime Trust to Fortress Trust and BitGo a few months ago. Last week, Ripple announced it was acquiring Swan Bitcoin’s major custodian, Fortress Trust. This presented a problem for Swan, given that since 2022, Swan Bitcoin CEO Cory Klippsten has been alleging criminal conduct by Ripple executives. Fortress Trust had reportedly lost considerable funds from its hot wallets in a security incident. Swan Bitcoin stated that while Fortress did lose funds, it did not impact any of Swan’s Bitcoin customers.
“Swan client coins are in insured cold wallets at BitGo and did not move during the reported incident at Fortress. The coins are protected by video calls and physical access and are not subject to any incidents at Fortress.”
The acquisition of Fortress caused a stir on social media, especially among Swan users, given Klippsten’s previous statements against Ripple and its executives.
In its announcement, Swan Bitcoin said it would partner with BitGo to launch a “Bitcoin-only Trust Company.” However, the trust would require regulatory approval before making it available to users. According to Swan, the partnership will help address the growing demand for Bitcoin-specific solutions and also address the custody and security requirements within the Bitcoin ecosystem.
Klippsten has stated that they would either acquire an existing custodian or build one. If they acquire an existing custodian, they aim to be live by Q1 2024. However, if they decide to build a new trust, the goal would be to go live by Q3 2024. Speaking about the partnership, the Swan CEO stated,
“We immediately saw the vision. For years, we’ve heard from major clients, partners, and other Bitcoin companies that they would prefer a Bitcoin-only software and services stack that is focused strictly on the best custody that leverages Bitcoin’s unique features. It’s important to us to build a custodian without the risks of securing many altcoins within the same trust company as Bitcoin. We want to do our part to build a dedicated ecosystem for Bitcoin, separate from industry speculators, to allow for innovation in custodial offerings.”
According to Klippsten, the move builds on an already existing collaboration between Swan and BitGo. Klippsten stated that BitGo has already held Swan users’ coins in cold storage since June, which will continue.
BitGo CEO Mike Belshe seemed to echo Klippsten’s sentiments, stating,
“We believe the best model for the Bitcoin industry is the same battle-tested model that has been part of the US financial industry for over a century: the separation of exchange and custody. Our teams have worked closely together for nearly a year on stronger qualified custody models. Early in 2023, we recognized the opportunity to establish a Bitcoin-only custodian, combining the unique capabilities of each company and supporting the innovators that will be at the forefront of pushing Bitcoin adoption.”
Klippsten also added that a Bitcoin-only custodian would go a long way in addressing user concerns and limiting their exposure to the larger cryptocurrency ecosystem. The Swan CEO has also stated that they expect to serve other asset managers, company treasuries, asset managers, governments, and on-ramps like Swan. According to Swan Bitcoin co-founder and CTO Yan Pritzker, the Bitcoin-specific trust company will help deliver a product that combines the best of self-custody services with components that require qualified custody.
“With the Bitcoin-specific trust company, we’ll finally be able to deliver the product that marries the best of self-custody service with the components that require qualified custody. This has never been achievable before because existing offerings focus on breadth of token support rather than the absolute best custody for Bitcoin. The new trust company will offer Bitcoin-specific features such as institution-grade advanced wallet management capabilities and more ways for clients to hold their own keys, inheritance planning, and adoption of new Bitcoin standards as they emerge.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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