Bitcoin News Today: Strategy Keeps Bitcoin Custody Secret Despite Coinbase Link

Strategy, a prominent Bitcoin holder, is maintaining a high level of secrecy surrounding its $72 billion Bitcoin stash. The company has distributed its holdings across multiple undisclosed custodians, with Coinbase being the only confirmed safekeeper. Speculation suggests that Fidelity might also be holding some of Strategy's Bitcoin.

Two weeks ago, Coinbase CEO Brian Armstrong revealed on X that his company holds Bitcoin for eight of the ten publicly traded Bitcoin holders. This disclosure strongly implies that Coinbase is one of Strategy’s custodians. Armstrong's statement underscores the significant role Coinbase plays in the custody of institutional Bitcoin holdings.

Strategy has been notably tight-lipped about its custody arrangements, only mentioning “various custody” setups without naming any specific firms. The company has avoided disclosing a single entity responsible for safeguarding its substantial digital assets. This secrecy has raised questions about the security and transparency of Strategy's Bitcoin holdings.

Strategy’s custodians are described as “U.S.-based, institutional-grade custodians that have demonstrated records of regulatory compliance and information security, and all of our custodians are New York Department of Financial Services (“NYDFS”)-regulated custodians.” This description narrows down the list of probable custodians to nine firms, including BitGo, Coinbase, GMO-Z.com, Fidelity, Bakkt, Gemini, NYDIG, Paxos, and Standard Custody & Trust Company. Coinbase is highlighted as the “principal market for Bitcoin” in Strategy’s filings, and Arkham Intelligence reported $70,000 worth of the company’s BTC being transferred to Fidelity in May. Additionally, Bakkt Trust Company is another potential custodian, given its history and regulatory compliance.

The secrecy surrounding Strategy's custody arrangements has drawn comparisons to the FTX scandal, where investors were kept in the dark about the company's financial dealings. The bankruptcy of Silvergate Bank and Signature Bank further underscores the risks associated with opaque custody practices. Strategy had used some of its Bitcoin as collateral for a loan from Silvergate, but the company has stated that these bankruptcies have not materially impacted its business or financial condition. However, the potential for a similar fate looms, given Strategy's history and the leadership of Michael Saylor, who has previously faced significant financial losses.

Saylor has expressed his opposition to publicly sharing “proof of reserves” or providing a detailed list of custodians, citing security concerns. However, as a public company trading under the ticker MSTR, some level of disclosure is expected. The market continues to demand transparency, but Strategy remains steadfast in its approach to maintaining secrecy around its custody arrangements.