Crypto Custodian BitGo Adding Support for Stellar (XLM) and Dash (DASH)

Siamak Masnavi

On Friday (5 October 2018), Mike Belshe, co-founder and CEO of BitGo, a "qualified custodian" for cryptoassets headquartered in Palo Alto, California, revealed during an interview with Fortune's "Balancing the Ledger" (Fortune’s video series on the intersection of finance and technology), that his company had added support for Dash (DASH) and that support for Stellar (XLM) would be ready "very soon."

Jen Wieczner, a Senior Writer for Fortune, started the interview by asking Belshe about what BitGo does. This was Belshe's answer:

"We are now a qualified custodian. That's through the Division of Banking in South Dakota. We were granted that a few weeks back actually.  And this allows us to help customers that need us to meet the 'Custody Rule'. So, the custody rule is part of the Investment Advisors Act of 1940. If you are a hedge fund... or somebody with fiduciary responsibility for someone else's money, when you hold their money or their asset, you are required to use what's called a 'qualified custodian'.

The exchanges are sometimes offering custodianship, but they are not qualified custodians themselves. And in fact, what they are really doing is trying to hold funds so that you'll use their exchange... In other asset classes, you don't have the exchange hold the funds. You just never do it. In fact, if the NYSE went to the SEC and said 'Let us be a custodian for the assets we trade, the SEC would laugh them out of the room... And this is because we know there's been a number of abuses that happen when you start to put these things together. You need a kind of separation and checks-and-balances between the different parties that are involved in trading... I am not saying that the exchanges are operating in a malicious way today; however, it does open up that potential for abuse.

The exchanges are primarily focused on retail investors, right? They are interested in signing up 100,000 users a day... They have a small team that works on security, but BitGo has the largest dedicated research and development team solely purposed toward security of any company in the world. And that's because that's all we do."

Wieczner then asked about the "big news" that Belshe wanted to announce. Belshe replied:

"This week, we are happy to announce that we are now supporting Dash, and Stellar is coming; it's in final test but it'll be out very soon... Both of these offer some advances, particularly around payments. In the case of Dash, they offer instant payments. That's one of their big focuses. They also have some privacy payments they do. And so, that's unique. In the case of Stellar, they've done a lot in terms of tokenization. They are also targeting global payments, more for consumers, a little bit different than what Bitcoin does."

It is also worth noting that Wieczner asked Belshe what he thinks about stablecoins. Belshe said:

"Well, first off, the industry has realized that creating a digital form of the dollar is better than the dollar... So, Tether was the first to do this is some regard, but it doesn't have the backing that people need in order to feel really safe about it. In spite of not having good backing and all kinds of doubt about it, people are using it at tremendous volumes because you move the money very quickly... So, the value is there... So, for me personally, if you want to have a stablecoin, it's got to be backed by a dollar...

So, Circle has got a new coin out, Paxos has got a new coin out, Gemini has a new coin out... all three of those are supported through BitGo wallets.

We don't support Tether. Tether is based on a different protocol: ... the Omni protocol... Also, the backing of it, frankly, I think, it has got some problems. There's been, just this last week, a decline of the price of Tether on certain exchanges to below a dollar... I don't think anyone knows the full story behind Tether, but my own opinion is that if I own tethers and I knew there was a dollar in the bank for every coin, if somebody wanted to sell me a dollar for 95 cents, I would be buying them, right? So the fact that they are not out on Kraken buying those, tells me that there is something wrong with it."

Featured Image Courtesy of BitGo