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On February 18th, 2020, digital asset custodian BitGo acquired Harbor, a securities tokenization platform. Through the acquisition, BitGo will extend beyond custodial services and break into the “issuing, trading, and transferring” of security tokens. The deal is set to make BitGo the world’s first company with broker-dealer, transfer agent, and qualified custodian licenses.
BitGo Acquires Harbor – Explained
BitGo is one of the largest digital asset custodians on the market. According to its CEO, the company sees $15 billion worth of transactions every month, processing 20% of all global bitcoin trades.
Now, the company known for providing digital asset custody services to institutional investors has entered the security token space. BitGo has acquired Harbor in a deal that took nearly everyone by surprise.
Included in the deal are Harbor’s subsidiaries, a FINRA-registered broker-dealer and an SEC-supervised transfer agent. As a licensed custodian through the South Dakota Division of Banking, BitGo is known for its ability to store digital assets owned by third-parties, including institutional investors.
As a result of the acquisition, BitGo will be able to trade securities for its customers as a broker-dealer — and record transactions as a transfer agent. Both FINRA and the SEC will have to approve BitGo as a broker-dealer and transfer agent, however. BitGo CEO Mike Belshe says the review process has already begun.
If everything goes as planned, BitGo will become the first company in the cryptocurrency space to have broker-dealer, transfer agent, and custodian licenses. Belshe said,
“As we build the market infrastructure for crypto there’s a lot of pieces to put together. At the end of the day the existing market has this huge advantage in having built up its structure over decades and we’re trying to replicate that in a short period of time.”
BitGo will add Harbor’s existing products and services as well. The company aims to leverage the acquisition in an effort to break into the security token industry. Belshe says,
“We’re significantly decreasing the barrier to entry by pulling all of these things together. This gives us full capabilities around issuing and trading and transferring of security tokens.”
How Security Token Platform Harbor will Help BitGo
Based in San Francisco, Harbor initially aimed to tokenize real estate. In 2019, Harbor announced the tokenization of a $20 million REIT involving a student residence in South Carolina, USA. A few months later, the deal was called off due to a dispute with the project’s mortgage lender.
Harbor has still seen success, however. In late 2019, Harbor inked a deal with iCap Equity to tokenize $100 million worth of real estate funds on Ethereum. At the time, the company announced a transition to focus on the tokenization of existing securities.
Harbor and BitGo have collaborated since late 2018. Harbor CEO Josh Stein says the existing partnership allows for the two services to go hand-in-hand. According to Stein,
“BitGo has been an important partner since Harbor inception. We’ve worked closely together to integrate BitGo Business Wallets and BitGo Custody into Harbor’s services. Harbor provides BitGo with a complementary technology stack for the lifecycle of digital securities, as well as important service capabilities through our digital assets broker-dealer and transfer agent subsidiaries.”
The deal’s terms were not publicly disclosed. Stein will stay on to join BitGo, though his exact role has yet to be revealed.
What do you think about BitGo acquiring Harbor? We want to know what you think in the comments section below.
Image courtesy of BitGo.