Dive Brief:

• Gemini, a cryptocurrency exchange, acquired London-based Shard X, a cryptocurrency custodian provider, for an undisclosed amount, Gemini said in a press release Wednesday. New York based Gemini didn’t disclose the terms of the acquisition or when it is expected to close. Shard X will provide multi-party computation (MPC) cryptographic technology to Gemini which will help in storing customer’s information securely and provide faster crypto transfers, Gemini said. 

• “The integration of this technology on the Gemini platform will help increase the speed with which Gemini can transfer customer assets and provide support for new asset listings and usage,” Gemini’s COO Noah Perlman said in an email statement provided by a spokesperson. 

• Crypto criminals stole $1.9 billion in cyber hacks, frauds and thefts in 2020 compared to $4.5 billion in 2019, a 57% drop, according to a report from Finaria, a finance and investment company. The fall in stolen digital assets comes as market participants boosted security systems, but criminal attempts in the decentralized finance space continue to grow, according to the report.

Dive Insight:

Gemini is planning to enhance its security protocols and provide faster crypto transactions to its customers through the acquisition of Shard X, a cryptocurrency custodial service provider, according to the release. London-based Shard X was founded in 2018 and has raised $650,000 since its inception, according to Crunchbase.

Shard X will provide MPC services to Gemini, improving the company’s security protocols, Gemini said. MPC "breaks up cryptographic keys" (used to log in into accounts and trade crypto assets) into shards and distributes them across the network, according to an explanation of the technology from Coindesk. That makes it difficult for hackers to steal information and digital assets. MPC technology is gaining popularity among crypto custodian companies like Curv and Fireblocks and is being used by other crypto custodian companies to enhance security protocols, Coindesk reported.

“Integrating Shard X's MPC technology into Gemini's custody enables us to meet current demand for fast withdrawals, interacting with DeFi staking, or the transferring of digital assets with greater efficiency,” Perlman said in the statement. “MPC technology provides a safe and uniform approach for achieving this speed across multiple cryptocurrencies.”

Prior to the wide use of MPC, financial institutions relied on storing information on physical hardware devices, according to reporting from CoinDesk. Allowing financial institutions to store information on hardware devices along with shredding them into small bits of data, provides quick and enhanced security to the crypto network.

Cryptocurrecnies have gained popularity among customers in the past couple years. According to a study by NYDIG, a financial technology firm focused on cryptocurrencies, about 46 million Americans, or 22% of the adult population, owned bitcoin in January 2021, compared to 8% of Americans who invested in the crypto in 2018.

The digital asset class is gaining momentum among customers and fraudsters alike. According to a report by Federal Trade Commission released last month, cryptocurrency related scams are increasing as they gain more popularity. More than $80 million had been lost to scams related to cryptocurrencies between October 2020 and March 2021 with a median loss of $1,900, compared to a total loss of $7.5 million between October 2019 and March 2020, the FTC report said.

Regulators across the globe are also looking to increase scrutiny of cryptocurrencies as they are gaining traction with fraudsters due to their anonymous and decentralized nature, according to a recent payments conference held last week. 

Gemini offers over 40 cryptocurrencies for trading and custody like bitcoin, ethereum, XRP and provides custodial services for another 11 cryptocurrencies. The crypto company "has more than $30 billion of crypto assets under custody, serving a range of individual and institutional customers," according to the press release.

Earlier this year, Gemini announced its plans to launch a crypto rewards based credit card in partnership with Mastercard. The credit card is slated to launch this summer and has received 280,000 applications since the announcement of its launch in March, the company said in an email.

In March, Gemini started working with Alloy, an identity verification company, to help with applicant ID verification and to determine credit limits for the rollout of their credit card.