Bank of New York Mellon invests in Crypto Startup

BNY Mellon’s strategic investment in Fireblocks is part of a larger financing round that Fireblocks announced on Thursday, after news of the investment was first reported by The Wall Street Journal. 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 Israeli military intelligence. The Series C financing round gives the company a valuation of more than $ 900 million, said a person familiar with the matter. Fireblocks have raised $ 179 million so far, including the new round.

Cryptocurrencies have seen a surge of interest this year from leading companies and financial companies. These include Mastercard Inc.,

who said he plans to support some cryptocurrencies on his network, and Tesla Inc.,

who bought $ 1.5 billion in bitcoins for his treasure.

Amid growing interest, the value of bitcoin has almost doubled since the beginning of the year and was trading above $ 58,000 on Thursday. The largest cryptocurrency exchange in the United States, Coinbase Global Inc., recently presented plans to go public on the Nasdaq Stock Market.

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

One reason money managers are reluctant to invest in cryptocurrencies – in addition to their volatility and uncertain regulatory status – is the lack of reliable custodians for digital assets. Secure storage is especially critical in encryption because of the frequency of cyber attacks. Collectively, hackers have stolen billions of dollars in digital currencies since bitcoin was launched in 2009.

BNY Mellon says it is moving into custody crypto to meet the growing interest in digital assets among institutional investors. “There is a very significant demand for digital assets in general,” said Roman Regelman, chief executive 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 custodian banks, also says it is working on a digital asset custody service.

Fireblocks has developed what is effectively a safe for cryptocurrencies, along with a cryptographic version of the Swift money transfer network used by banks.

In February, more than $ 100 billion in digital assets were transferred over the Fireblocks network, more than double the level of three months earlier, the company says. This rapid growth reflects the rise in bitcoin, ether and other cryptocurrencies, as well as the increased use of the network. Fireblocks claims to have more than 200 customers, 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 chief executive and co-founder Michael Shaulov. He declined to identify the banks.

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

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

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

An Israeli Defense Forces spokesman declined to comment.

Write to Alexander Osipovich at [email protected]