Latest news: Valkyrie diversifies custody of its Bitcoin ETF


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Curious news regarding one of the new Bitcoin spot ETFs launched in January on the US stock exchanges: Valkyrie, in fact, has decided to diversify the custody of its BTC in its ETF. 

Bitcoin news: Valkyrie’s BTC custody

At the time of launch on the market, the custody of the BTC for the new Valkyrie Bitcoin spot ETF (BRRR) was solely entrusted to Coinbase Custody.

It should be noted that Coinbase Custody has been chosen as the custodian of BTC by other ETFs as well, primarily by BlackRock (IBIT) and Grayscale (GBTC).

Coinbase is a publicly traded company, as well as the largest US crypto exchange, and is also the only major crypto exchange to be listed on the US stock market (on Nasdaq). 

Currently, it is probably the safest crypto exchange in the world, and the one most capable of providing institutional-level services, such as custody. 

However, having a single custodian means running the risk that in case of a breach, all the Bitcoin could be lost.

The risks of Coinbase Custody wallets being violated seem to be very low, but it is always good practice to differentiate in these cases, as long as you always and only use custodians with a high level of security. 

The company BitGo

The second custodian chosen by Valkyrie is BitGo. 

BitGo provides regulated crypto services such as custody, staking, and trading, based on a wallet infrastructure. 

It is a company that has been in existence for 11 years now, and it has been a pioneer in multi-signature wallets. They also claim to have been the first digital asset company to focus exclusively on services offered to institutional clients. 

Its flagship custody service is the BitGo Trust Company, launched in 2018, which in turn founded BitGo New York Trust in 2021. 

Nowadays its services have a total of 1,500 institutional clients in 50 countries, including many regulated entities and the main crypto exchanges in the world.

Bitcoin news: the partnership between BitGo and Valkyrie 

BitGo and Valkyrie share a common mission, which is to separate exchanges from custody.

However, ETFs require qualified custodians to protect the underlying digital assets.

BitGo actually has been collaborating with Valkyrie Investments for a long time, which manages 220 million dollars. In fact, it claims to be the largest independent qualified custodian worldwide. 

The Chief Investment Officer of Valkyrie Investments, Steven McClurg, stated:

“Valkyrie has a long-standing relationship with BitGo and is excited to grow the partnership between our companies.”

The CEO of BitGo, Mike Belshe, has added: 

“Valkyrie Investments has already made a name for itself by providing investors with funds to tap into the digital asset space. Earlier this year, they took a new step forward with their new ETF to help investors worldwide access Bitcoin. It is a privilege to be their custodian to support their product. Our goal is to demonstrate the value of private custody solutions to drive the next wave of adoption.”

The problem of custody

The issue of secure BTC custody is always a problem.

In fact, technically BTC always and only exist on the blockchain, which is a public and practically invulnerable shared file. 

However, this means that it is known exactly on which public address they are stored. For example, it is known that BRRR owns about 2,600 BTC, and it is also known on which addresses.

Although these addresses are public, each of them requires a private key to be able to use the BTC stored on them, and this is the critical point: anyone who manages to obtain that key can freely use those BTC, without anyone being able to stop them. 

Therefore, it is necessary to keep those private keys extremely safe, also because they are absolutely necessary to use BTC. The task of the custodians is precisely to securely keep the private keys, making them usable by customers when needed.

This also explains why not even Coinbase Custody can be considered 100% secure, although it is probably at least 99% secure.