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- The company’s hard-won agreement to be the custodian of Bitcoin confiscated by the US government was a victim of its own success
- Within five days, that victory was jeopardized when at least one of the contract’s 14 losers complained to the SBA. BitGo was their first choice and it was protested by competitors, BitGo CEO Mike Belshe told
- Galaxy’s certainly no small business, and few in the crypto world would consider pre-buyout BitGo or Anchorage, which holds a BitLicense from New York state that allows it to conduct digital asset business in the state, to be mom-and-pop shops either
The company’s hard-won agreement to be the custodian of Bitcoin confiscated by the US government was a victim of its own success. The six-year contract with the US is worth $4.5 million. The Marshals Service, which CoinDesk first reported on in April, was canceled late last week. Instead, Anchorage, a smaller rival, was awarded a $6.6 million USMS contract that would expire in five years. On a technicality, BitGo was disqualified. According to USMS spokesperson Lynzey Donahue, the company was just too big to obtain a small business contract, thus the initial agreement was canceled by the Small Business Administration (SBA).
The reversal is the latest twist in a contract drama that began in 2018 when the USMS initially indicated it required assistance keeping illicit currencies. A division of the United States of America. The United States Marshals Service (USMS) is in charge of disposing of millions of dollars in cryptocurrency that its sister agencies have confiscated. According to public data, fifteen firms proposed USMS commencing in June 2020.
Some were omitted from consideration – the most prevalent reason, according to the government, is that the company is too big for a small business contract – but BitGo and Anchorage both made it through. The deal was signed on April 21 by BitGo. The news was first reported by CoinDesk the next day, and then by BitGo the next day.
Within five days, that victory was jeopardized when at least one of the contract’s 14 losers complained to the SBA. BitGo was their first choice and it was protested by competitors, BitGo CEO Mike Belshe told. The identity of the protester is unknown, but it triggered a bureaucratic review that resulted in BitGo losing the contract and runner-up Anchorage winning it. They were unable to comment on BitGo, Anchorage stated in a statement.
However, Anchorage participated in a year-long process and was ultimately chosen, Anchorage added. It wouldn’t say anything about what went on behind the scenes. The government contracting market is saturated in cash, private sector suitors, and more than a smidgeon of status. Having a law enforcement partner who can potentially counterbalance the shadow is a reward in and of itself, especially in crypto, which has a thriving criminal underworld.
Some crypto companies want to stay away from the spotlight. Chainalysis, the largest crypto tracking firm, for example, does not make a big deal out of every million-dollar transaction it gets from a government body. Since 2015, it has received over 100 government contracts from the Drug Enforcement Administration, Immigration and Customs Enforcement, the Internal Revenue Service, and the FBI.
BitGo and Anchorage have each had only one record in the public databases – the same USMS custody deal. Both quickly marketed their contract wins. One BitGo executive gushed in an April news release, they consider this as a confirmation of the company’s service. Anchorage announced the same thing three months later. Losing the contract would likely have a minimal financial impact on BitGo, which agreed to a $1.2 billion purchase by financier Mike Novogratz’s crypto conglomerate, Galaxy Digital, just two weeks after announcing pre-emptive victory in April.
Galaxy’s certainly no small business, and few in the crypto world would consider pre-buyout BitGo or Anchorage, which holds a BitLicense from New York state that allows it to conduct digital asset business in the state, to be mom-and-pop shops either. But the SBA sets the line for small businesses in the commodity contracts dealing industry at those with less than $41.5 million in annual revenue. According to SBA press officer Clements Tiffani, the agency looked at a”snapshot of BitGo’s financial records from May and June 2020 and discovered the company’s income was too high for an SBA contract.
BitGo has the option of appealing our decision, but they haven’t done so yet, she wrote in an email. According to Shane McCall, a lawyer at the legal firm Koprince McCall Pottroff, which specializes in fighting SBA judgments, if BitGo appealed, a plethora of papers revealing the company’s size, wages, and income might be made public. Belshe, who will become Galaxy’s deputy CEO and a board member after the merger is completed, has opted to leave the company. He explained, they are busy with their business. The last thing he needs to do is keep fighting.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
