Bakkt is reshaping its business model to focus on digital asset custody, as indicated by its recent announcement of support for six new coins. In addition to Bitcoin (BTC) and Ether (ETH), Bakkt is expanding its custodial services to include Bitcoin Cash (BCH), Dogecoin (DOGE), Ethereum Classic (ETC), Litecoin (LTC), Shiba Inu (SHIB), and USD Coin (USDC). This move aims to bolster Bakkt’s position as a key player in the custody of digital assets, a critical aspect of the crypto industry ecosystems.
The custody of digital assets encompasses the secure storage of cryptographic keys, which are essential for accessing and transferring assets. Custodians such as Bakkt employ various security measures, including cold storage of coins and multisignature technology that requires multiple approvals for asset access, to protect assets from potential security breaches.
Bakkt’s decision to expand its custodial support comes on the heels of its release of its quarterly earnings report, which revealed an adjusted EBITDA loss of $21.6 million, representing a 30% decrease year-over-year due to a reduction in compensation and benefits. The report indicated that Bakkt’s crypto revenue reached $191.8 million in the third quarter of 2023, a result of the acquisition of Apex Crypto in April, contributing to a total revenue of $204.8 million. Bakkt reported $505.7 million in assets under custody, a 28% decrease from the previous year.
In addition to expanding its custodial services, Bakkt is also forging partnerships to strengthen its position in the crypto custody space. The company recently outlined plans to offer clearing and custodial services for the Wall Street-backed crypto exchange EDX Markets, initially serving as a backup qualified custodian. Bakkt also welcomed new clients on its custodial services, including Bitcoin platform Unchained and LeboBTC, a crypto consulting firm for institutional investors, demonstrating its strategic efforts to build a robust ecosystem for digital asset custody.
Bakkt’s strategic focus on expanding its custody services aligns with its business-to-business client targeting strategy, as the company has shifted its focus to cater to institutional clients as part of its overarching financial strategy. The decision to sunset its consumer-facing app launched in 2021 earlier this year underscores Bakkt’s commitment to providing tailored solutions for business clients in the crypto space amid changing market dynamics.
Notably, Bakkt’s move to bolster its crypto custody arm mirrors a broader trend in the financial industry, as traditional financial institutions also set their sights on digital asset custody. In 2022, BNY Mellon, the oldest bank in the United States, launched a digital custody platform to safeguard Ethereum (ETH) and Bitcoin (BTC) holdings for select clients, signaling the growing interest in digital asset custody by established financial institutions. Similarly, Germany’s third-largest bank, DZ Bank, began offering crypto custody to institutional investors earlier this year, further underscoring the growing prominence of digital asset custody services in the financial sector.
Bakkt’s initiatives in expanding its custodial services and forging strategic partnerships are indicative of the company’s commitment to establishing itself as a key player in the digital asset custody space. As the company continues to solidify its position as a custodial services provider, its efforts align with broader industry trends that highlight the growing importance of digital asset custody in the evolving landscape of the financial sector.
