Bakkt, the prominent digital exchange marketplace, is making a significant shift toward digital asset custody as its primary business focus, as indicated by an announcement on November 15. This is evident by the recent announcement of adding support for six new coins, emphasizing its commitment to expanding custodial services. Bakkt aims to expand its portfolio by incorporating additional coins into its custody offerings in the early months of 2024.
As a digital asset custodian, securely managing cryptographic keys is of vital importance as it plays a vital role in accessing and transferring assets. For this, Bakkt implements various security measures, such as the utilization of cold storage for coins and multi-signature technology that requires multiple approvals for access.
This strategic move follows Bakkt’s release of its quarterly earnings report on November 14. The report disclosed an adjusted EBITDA loss [non-GAAP] of $21.6 million, reflecting a 30% year-over-year decrease attributed to a reduction in compensation and benefits. Despite this, Bakkt reported substantial crypto revenue of $191.8 million in the third quarter of 2023, primarily driven by the acquisition of Apex Crypto in April. Over the quarter, the crypto firm achieved a total revenue of $204.8 million. However, the assets under custody decreased by 28% compared to the previous year, amounting to $505.7 million.
Bakkt’s Bet On Crypto Custody
To reinforce its crypto custody division, Bakkt is actively forming partnerships. The company’s quarterly report outlines plans to provide clearing and custodial services for EDX Markets, a Wall Street-backed crypto exchange, initially serving as a backup qualified custodian. Among the new clients availing of custodial services from Bakkt is the Bitcoin platform Unchained and LeboBTC, a crypto consulting firm catering to institutional investors.
Gavin Michael, CEO of Bakkt, highlighted the necessity of qualified crypto custody, stating, “The events of the past year have revealed why qualified crypto custody is so necessary.” Expanding custodial services is a key component of Bakkt’s strategy, particularly in targeting business-to-business clients. In February, the company announced the discontinuation of its consumer-facing app launched in 2021 to shift its focus toward institutions during the crypto winter.
This move aligns with a broader trend in the financial industry, where traditional institutions are increasingly venturing into the custody of digital assets. In 2022, BNY Mellon, the oldest bank in the United States, launched a digital custody platform to safeguard ETH and BTC holdings for selected clients. Similarly, DZ Bank, Germany’s third-largest bank, commenced offering crypto custody services to institutional investors earlier this month.