Bank of New York Mellon Invests in Cryptocurrency Startup

Bank of New York Mellon Corp.

BK 0.41%

is investing in a cryptocurrency startup, the latest move by a traditional Wall Street gamer to embrace digital assets.

The startup, Fireblocks, creates tools for the safe storage and transfer of bitcoins and other cryptocurrencies. BNY Mellon plans to use Fireblocks technology to shore up a new business the bank unveiled last month, in which it plans to serve as a custodian of digital assets on behalf of institutional investors.

BNY Mellon’s strategic investment in Fireblocks is part of a larger funding round that Fireblocks announced Thursday, after The Wall Street Journal first reported on the investment. The New York-based startup raised $ 133 million from investors, including hedge fund firm Coatue Management LLC and venture capital firms Ribbit Capital and Stripes. BNY Mellon did not disclose the size of its investment.

Fireblocks was founded in 2018 by veterans of the Israeli military intelligence. The Series C funding round gives the firm a valuation of more than $ 900 million, a person familiar with the matter said. Fireblocks has raised $ 179 million to date, including the new round.

Cryptocurrencies have enjoyed a wave of interest this year from major financial companies and corporations. Those include Mastercard Inc.,

which has said that it plans to support some cryptocurrencies on its network, and Tesla Inc.,

who bought $ 1.5 billion in bitcoins for his treasury.

The price of bitcoin is skyrocketing, fueling a rebound in trade momentum that has raised its value higher than ever. WSJ explains how bitcoin trading works and why the volatile digital currency is hitting all-time highs. Illustration: Jacob Reynolds / WSJ

Amid growing interest, bitcoin has nearly doubled in value since the beginning of the year and was trading above $ 58,000 on Thursday. The largest cryptocurrency exchange in the US, Coinbase Global Inc., recently unveiled plans to go public on the Nasdaq stock market..

BNY Mellon is one of the largest custodial banks in the world. Such banks play an essential role in global finance by ensuring the safe storage of assets held by institutional investors, such as pension funds and mutual funds.

One of the reasons money managers have been reluctant to invest in cryptocurrencies, aside from their volatility and uncertain regulatory status, is the lack of trusted custodians for digital assets. Secure storage is especially critical in cryptocurrencies due to the frequency of cyberattacks. Collectively, hackers have stolen billions of dollars in digital currencies since Bitcoin made its debut in 2009.

BNY Mellon says it is entering crypto custody to cater for the growing interest in digital assets among institutional investors. “There is a very significant demand for digital assets in general,” said Roman Regelman, executive director of digital business and asset services at BNY Mellon. “They are becoming part of the mainstream.”

Earlier this month, payment giant PayPal Holdings Inc.

acquired a Fireblocks rival, Curv, in another sign of interest in crypto custody technology. State street Corp.

, one of the other major custodial banks, also says it is working on a digital asset custody service.

Fireblocks has developed what is effectively a cryptocurrency safe, alongside a crypto version of the Swift money transfer network used by banks.

In February, more than $ 100 billion of digital assets were moved through the Fireblocks network, more than double the level from three months earlier, the firm says. That rapid growth reflects the rally in bitcoin, ether, and other cryptocurrencies, as well as increased network usage. Fireblocks says it has more than 200 clients, including some of the largest crypto-focused trading firms.

The startup is also working with five other multinational banks in addition to BNY Mellon, according to Fireblocks CEO and co-founder Michael Shaulov. He declined to identify the banks.

Previously, Shaulov led a startup specializing in mobile device security, Lacoon Mobile Security, which was acquired by Nasdaq-listed Check Point Software Technologies Ltd. in 2015.

In the early 2000s, he served in the Israel Defense Forces Unit 8200, the country’s equivalent of the National Security Agency. The other two co-founders of Fireblocks and many of its engineers have similar backgrounds.

In an interview, Shaulov said that his experiences in the secret unit lay the foundation for his career in cybersecurity. “Once you understand how attackers work, or how attackers operate in their most advanced capacity, it gives you an advantage in terms of understanding how to build defense systems,” he said.

A spokesman for the Israel Defense Forces declined to comment.

Write to Alexander Osipovich at [email protected]

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