BNY Mellon Joins $133 Million In Series C In Bitcoin Custodian Fireblocks

BNY Mellon Joins $133 Million In Series C In Bitcoin Custodian Fireblocks

New York City-based Crypto custodian Fireblocks has raised $133 million in Series C venture capital funding with strategic investment from BNY Mellon and SVB Capital.

The round was led by Coatue, Ribbit, and Stripes, according to Fireblocks’ statement. The completion of the round brings the company’s total amount of venture capital raised to $179 million. Previous investors include Paradigm, Galaxy Digital, and Swisscom Ventures. The firm declined to disclose how much the investment valued the company.

With raised capital, the company plans to expand the infrastructure for its rapidly increasing customer base. “Engineering is going to be a major part of our spend,” says Fireblocks’ CEO and co-founder Michael Shaulov. Over the past couple of months, the firm has onboarded 70 new clients and will likely have 80 new customers by the end of this quarter, twice more than forecasted. To date, FireBlocks has completed $400 billion in digital asset transfers for approximately 230 clients including banks, hedge funds, fintech firms, and exchanges, among others. The firm closely advises 50% of the top 70 banks in the world and is developing pilot products with five multinational banks, says Shaulov. Assets under management lie in the $10-20 billion range.


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“We are proud to be a part of the larger movement to bring digital assets mainstream,” said a spokesperson for BNY Mellon in an email. “This strategic investment is the logical next step in our journey to being an asset servicer for all asset classes.” In February, America’s oldest bank launched a digital assets unit and is starting to provide fund accounting and administration services for a bitcoin ETF in Canada, with plans to expand the offering to the U.S. when such products are approved. The bank’s own digital asset custody “will be available later this year pending required approvals,” writes the company’s representative.  No further details were disclosed but Fireblocks’ underlying technology will be “an important part” of the new digital assets platform.

Fireblocks’ relationship with the world’s largest custody bank can be traced back all the way to mid-2018, mere weeks after Fireblocks’ founding, according to Shaulov, – an amusing scenario for the far less turbulent, if not abandoned, crypto market post the ICO bonanza of 2017. 

The company’s recent success has implications far beyond the frothy cryptocurrency industry, with bitcoin alone breaking the $1 trillion mark in market capitalization a month ago. Forbes has previously reported on the flood of old-line financial institutions into the cryptocurrency custody business.

In March 2019, Fidelity began offering bitcoin custody service through a separate subsidiary called Fidelity Digital Assets. Last December, the unit partnered with crypto management platform BlockFi to provide custody to clients who borrow from BlockFi against their bitcoin holdings. The same month, Northern Trust
NTRS
and Standard Chartered, two of the world’s largest securities services providers, jointly launched crypto custody Zodia, based in London. 

With billions of dollars at their disposal, brand recognition, and much larger clientele, these legacies could pull the rug out of the ever-popping crypto unicorns, but the youngsters are hungry for success. More importantly, the knowledge gap gives way. “We are engaged with the most senior leaders across capital markets and they’re leading the charge of that conversation. There is still a significant amount of education that needs to be built into a lot of those relationships,” says Shaulov.

Fireblocks was founded in 2018 by members of the taskforce at cybersecurity company Check Point
CHKP
, which was investigating the 2017 hacks of South Korean crypto exchanges by Lazarus Group, a hacking operation attributed to the North Korean government. The New-York based startup provides an enterprise-grade platform for moving, storing, and issuing digital assets, including bitcoin, ethereum, polkadot and others. 

Like many other companies in the space, FireBlocks has grown exponentially thanks to the bitcoin rally. Just this February, it has transferred more than $100 billion worth of digital assets, almost 17 times more compared to $6 billion transferred in February 2020. 

The partnership with one of the world’s largest asset managers makes Fireblocks an attractive target for an acquisition. On March 8, PayPal
PYPL
announced it is acquiring Israeli-based crypto security infrastructure provider Curv, Fireblocks’ closest competitor. Both companies use the same type of technology to protect clients’ assets called multi-party computation (MPC). With this approach, multiple parties can each conduct computation on their own fragments of a larger function while keeping their inputs private and still produce the desired outcome. 


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Shaulov says Fireblocks has not yet been approached with an acquisition offer but the deal between PayPal and Curv is a positive sign for the company. The fact that PayPal “leaned in and recognized this new generation of technology really shows this is the standard,” says Shaulov. 

Fireblocks has also been working with the Diem Association, an organization behind controversial stablecoin of the same name developed by Facebook
FB
. The startup created an infrastructure for any merchant or payment service willing to accept Diem as payment. Facebook’s brainchild, previously known as Libra, is on track for launch later this year.


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