Galaxy Digital May Be in Talks to Acquire Crypto Custodian BitGo

Galaxy Digital, the cryptocurrency-focused financial services firm run by Michael Novogratz, is in advanced talks to acquire U.S.-regulated cryptocurrency custody specialist BitGo, according to four people familiar with the matter.

Currently, both Galaxy and BitGo declined to comment on the matter.

Silicon Valley-based BitGo has reportedly been in acquisition talks with fintech giant PayPal for the past year. Citing two people familiar with the matter, CoinDesk reported last month that PayPal offered the custody company up to $750 million in cash for a consideration, but the two sides have yet to reach an agreement. PayPal subsequently agreed to acquire Curv, another cryptocurrency custody company.

“Galaxy doesn’t have a custody business and acquiring Bitgo makes sense internally for them,” a source familiar with the discussions told CoinDesk. BitGo also manages WBTC, a service with $8.5 billion in locked value that “wraps” bitcoin into ethereum-compatible tokens.

Since late last year, the ongoing cryptocurrency boom has led to a notable increase in activity involving custodians, a key component in the institutionalization of digital asset trading. (Fireblocks, for example, raised $133 million and confirmed it is working with BNY Mellon to power the global custodian bank’s upcoming crypto service.)

Details of the deal were not immediately clear, but a traditional financial firm could be involved along with Galaxy, one of the sources said.

In addition, according to sources within Goldman Sachs, BitGo is one of the custodians being considered by the Goldman Sachs Wealth Fund, which will provide Bitcoin to high-net-worth investors. (Goldman Sachs and Galaxy Digital are both investors in BitGo.)

Galaxy and 86-year-old Wall Street institution Morgan Stanley are both members of the NYDIG cryptocurrency trading consortium, an emerging player among institutional buyers of bitcoin that has raised $300 million since March.

Galaxy, which also provides investment banking advisory services, recently reported an 842% increase in fourth-quarter trading revenue to $238.7 million. Novogratz also said the company is actively planning a U.S. listing in the second half of this year.

BitGo has raised $69.5 million in six funding rounds, including investment from Galaxy Digital.

As of press time, shares of Galaxy Digital Holdings, which are listed on the Toronto Stock Exchange (TSX: GLXY), are trading at 34.10 Canadian dollars.