Today institutional Bitcoin firm NYDIG said it raised $200 million in growth capital. The round was led by parent Stone Ridge Holdings, Morgan Stanley, New York Life, MassMutual, Soros Fund Management, and FS Investments.
NYDIG is a regulated custodian and prime brokerage, which was set up by Stone Ridge in 2017 when it couldn’t find institutional-grade services. The startup grabbed headlines in early December when MassMutual said it invested $5 million and had bought $100 million Bitcoin using NYDIG solutions. Today NYDIG said that through its platform, life, annuity, and property & casualty insurers own or have exposure to $1 billion in Bitcoin.
“NYDIG will be working with these firms on Bitcoin-related strategic initiatives spanning investment management, insurance, banking, clean energy, and philanthropy,” said Robert Gutmann, co-founder and CEO of NYDIG.
“These partnerships leave no doubt that institutional adoption of Bitcoin has arrived and, further, that NYDIG is the partner of choice for serious financial services firms with the highest fiduciary and diligence standards.”
The reference to clean energy is notable. Institutions are increasingly accountable for their ESG activities. One of the challenges with Bitcoin is that it’s extremely energy-hungry to maintain its security through Proof of Work, which is widely seen as wasteful of electricity.
That goes against ESG principles, although Bitcoin maximalists often attempt to claim a large proportion of the energy is renewable. Cambridge Centre for Alternative Finance (CCAF) put the renewable proportion at 39%. Many other blockchains such as Ethereum have a path to migrate away from Proof of Work, but Bitcoin has no such plans.
There are plenty of dirty manufacturing companies that invest in renewables to offset the environmental damage. But it’s a matter of scale. As Bitcoin becomes more valuable and its security needs increase, the question is whether institutions will be able to justify their investments on ESG grounds.
