With a wave of institutional investors expected to enter the Bitcoin game in coming months, safely storing cryptocurrency is becoming a top priority.
BitGo, a virtual wallet provider based in Palo Alto, Calif., said Monday it raised $42.5 million in venture capital fundraising as it gears up to service a hoard of new customers. The company helps secure digital assets held by hedge funds, exchanges, trusts, broker-dealers, and other businesses, including CME Group in Chicago and The Royal Mint in the United Kingdom.
Founded in 2013, BitGo carved out a niche specializing in multi-signature wallets, which require multiple parties to sign off on a transaction before any digital money moves out of one of its wallets. In a typical setup, a customer holds two of the cryptographic private keys used to authorize transactions, one for active use that can be split multiple-ways among a select group of people and another stored for safe-keeping as a backup; BitGo then uses a third key to cosign transactions.
Right now, BitGo works with seven cryptocurrency types: Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, Bitcoin Gold, and Royal Mint Gold. The company has plans to add more.
“There’s obviously a tremendous interest and demand for digital currencies,” says Mike Belshe, BitGo cofounder and CEO. “We’ve recognized for long time that blockchains and digital currencies are going to change the way we do finance.”
BitGo claims that its technology helps facilitate $8 billion in cryptocurrency transactions each month. The company says its wallets account for roughly 18% of the activity on the Bitcoin network.
Bitcoin has been on a tear lately, its price increasing more than 1,000% over the year and trading now at around $16,500. Skeptics have cautioned that the spectacular run-up in valuation seems like a bubble.
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Investment firm Valor Equity Partners led the new fundraising round. Other investors included PayPal (PYPL) alum David Sacks, West Coast Holdings’ Bill Lee, and Chicago-based investment firm DRW.
As part of the deal, BitGo has gained two board members: Antonio Gracias, founder and chief investment officer at Valor, who also serves on the board of Elon Musk’s ventures Tesla (TSLA) and SpaceX, and David Sacks, who previously served as CEO of Microsoft-owned (MSFT) Yammer and the embattled HR software maker Zenefits.
BitGo has raised $56.5 million to date. Rival cryptocurrency wallet providers include Coinbase, Blockchain, and Xapo.
Belshe says he expects institutional investors to flood the virtual currency market with billions of dollars over the next year or so. The opportunity is “probably bigger than any of the numbers anyone has stated so far,” he tells Fortune, estimating anywhere from $25 billion to $100 billion soon entering the arena.
“We see where flows are going in ways other cannot see,” Belshe says, referring to the bird’s-eye-view BitGo has of its wallets. “It gives us a unique perspective on network.”
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