In January, BitGo, a Silicon Valley bitcoin wallet startup, announced plans to acquire Kingdom Trust, a Kentucky company that has quietly become a leading player in a thriving market serving cryptocurrency funds.

The move would have positioned BitGo to compete with a small but growing pool of players offering custodial service---in essence, storage of crypto assets---to high-net-worth individuals, institutions, and funds. It was designed to merge BitGo’s tech products, which offer a secure way for individuals to store bitcoin and crypto assets, with Kingdom’s custody services, which serve institutions. Having a trust charter, as Kingdom Trust does, would have given the combined entity a leg up on competition from Coinbase, Gemini (an exchange run by the Winklevoss twins), Ledger, ItBit, and Nomura, the Japanese bank which in May announced plans to offer crypto custody.

But the charter wasn’t enough to make the merger of a risk-averse financial trust in Kentucky with a venture-backed startup in Silicon Valley work. Kingdom gained regulatory approval for the change of control in April, but a month later, the companies dissolved their merger plans.

According to Kingdom CEO Matt Jennings, the deal fell through in final negotiations. “As with all mergers, there were many details that had to be negotiated and worked through. We simply could not work through the final details,” Jennings said. Jennings said disagreements were not specific to crypto, but “the typical final negotiations between two companies in these sorts of deals.”

BitGo CEO Mike Belshe did not elaborate on the reasons for the merger ending beyond a blog post announcing that the company has applied for a trust charter to build its own custodial solution.

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As a result of the split, BitGo and Kingdom find themselves in competition with each other, as BitGo builds its custody offering. “We have worked closely with customers to understand their custodial needs and have realized that to offer the best custodial solution, we needed to build our own qualified custodial offering,” BitGo product marketing executive Robin Verderosa wrote.

Kingdom continues to offer its custodial services from Murray, Kentucky. Jennings says the split changes nothing about Kingdom’s plans to expand and upgrade its products. “We were the leader in digital asset custody long before any merger was contemplated and plan to keep pressing forward as the leader in the market,” he says.

Meanwhile, Coinbase, the largest and best-known digital currency exchange and wallet in the US, has launched its much-anticipated custody option, and Nomura’s announcement shows that some traditional banks also want a piece of the crypto action.

Institutional custody is a small but important part of the movement to legitimize crypto investing. Crypto hedge funds have proliferated over the last 18 months, with an estimated 100 new ones launching in 2017. A late-2017 surge in the price of bitcoin and other crypto assets meant lots of small funds found themselves suddenly managing large portfolios of crypto assets. Hedge funds with more than $150 million in assets are required to store their assets with a qualified custodian. In a February interview, Belshe estimated that two dozen hedge funds crossed that threshold last year, but were not complying with the rule. This year’s slump in crypto prices may have solved the problem for many.

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