Blockchain Security firm BitGo is releasing a new service for the institutional clients, a clearing and settlement system which operates off chain.
As per the new release, BitGo's new clearing and settlement service will be offered to the regulated BitGo Trust Company clients, and make sure that the Assets "never need to leave custody" when being transferred and along with the real settlement to be "fast, compliant and secure." At the time of the trade, BitGo will be working as a custodian for both sides and it ensures that it will reduce the counterparty risk.
Apart from the counterparty risk, BitGo says that its latest offering will reduce security risks, stop accidental compliance infringement and enable investors to more efficiently allocate their capital.
BitGo believes that the in-house clearing and settlement service will help to effectively arrange such deals. For example, the transfer between the two firms will be recorded, however, assets which are being traded during the agreement will remain in cold storage. By this, the risk of fraud from any party or outside actors is decreased. Moreover, investors don't need to break up their balance sheets by parking assets with all the exchanges with which they wish to trade.
Mike Belshe, BitGo's Cheif Executive said in a statement that the latest service is specially meant for the institutional clients. Apart from the counterparty risk, institutional investors might face problems with having to keep assets on various exchanges before conducting trades and settling transactions outside the cold storage.
“Until now, in a digital asset trade, one party needed to assume all of the risk and act on the counterparty’s good faith, and this doesn’t really work for institutional investors.”
He further added,
“We are bringing to market a risk-less, efficient, and compliant digital asset clearing and settlement, and what makes this service possible is BitGo Trust’s strong client base.”
The new service is in the working phase from quite a long time. In September 2018, BitGo has received approval from the regulators to work as a custodian for digital currencies, an essential requirement for this plan. The off-chain clearing and settlements service is the first publicly declared project certain to the BitGo Trust Company.
It's not known whether the service will be available for the wide number of investors in the near future. Presently, the service is only available to the “OTC desks, single-dealer platforms, exchanges, asset managers and broker-dealers,” as per BitGo's press release. In order to take benefit of the latest service, all participants in the transaction have to custody their assets with BitGo.