Mike Novogratz's Galaxy Digital Said to Be in Talks to Buy Crypto Custodian BitGo

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

Both Galaxy and BitGo declined to comment.

Silicon Valley’s BitGo was last year reported to have been in acquisition talks with fintech giant PayPal. No deal was reached, but PayPal offered as much as $750 million in cash for the custody company, CoinDesk reported last month, citing two sources familiar with the matter. PayPal later agreed to acquire Curv, another cryptocurrency custody firm.

“Galaxy does not do custody so it makes sense to bring that in-house,” one of the sources familiar with the discussions told CoinDesk. BitGo also administers WBTC, a service with $8.5 billion in locked value that “wraps” bitcoin into Ethereum-compatible tokens.

The sustained buoyancy of cryptocurrencies since late last year has seen a marked increase in activity involving custody firms, a key component in the institutionalization of digital asset trading. (Fireblocks, for instance, raised $133 million and confirmed it is working with BNY Mellon to power the global custody bank’s forthcoming crypto service.)

Details of the deal are unclear at this stage, but a traditional financial firm may also be involved alongside Galaxy, said one of the sources.

Read more: Galaxy Digital Appoints Ex-Goldman Sachs Executive as Chairman

Separately, BitGo is one of the custodians under consideration for a Goldman Sachs wealth fund, which will offer bitcoin to high-net-worth investors, according to a source inside the bank. (Goldman and Galaxy are both investors in BitGo.)

Galaxy is part of the NYDIG crypto trading consortium alongside the 86-year-old Wall Street institution Morgan Stanley. NYDIG, an emerging player among institutional bitcoin buyers, has raised $300 million since March.

Galaxy, which also conducts investment banking advisory services, recently reported that income from its trading business had increased 842% to $238.7 million in Q4. Novogratz also said the company is actively planning to list in the U.S. in the second half of this year.

Read more: Galaxy Digital Prepares for US Listing in 2021, Names New CFO

BitGo has raised $69.5 million over six funding rounds, which has included investments from Galaxy Digital.

Shares in Galaxy Digital Holdings, which is listed on the Toronto Stock Exchange (TSX: GLXY), were trading at CAD$34.10 (US$27.30) at press time.