Why a Tiny Kentucky Firm Rules a Corner of the Crypto Market


If banks and hedge funds start holding large amounts of cryptocurrencies, much of the money will flow—virtually, of course—through Murray, Kentucky. That’s home to Kingdom Trust, a small company that’s quickly become the crypto industry’s go-to option for holding its digital coins.

The crypto revolution has a few kinks to work out before it can revolutionize anything. One of the simplest problems—how institutional investors can safely and legally store their tokens—is creating opportunities for unexpected players like Kingdom. In January, the 60-person firm agreed to sell itself to BitGo, a San Francisco tech startup, making for strange bedfellows, even in an industry full of unexpected players.

Kingdom is among the boutique, seemingly out-of-nowhere firms taking risks to get in on early on a potential revolution. As is common in crypto-land, many of these service providers stumbled into the category almost by accident, then saw an opportunity. Their willingness to experiment and their appetite for risk have been rewarded with expertise, reputations, and a head start on dominating a potentially huge new market.

Silvergate Bank, a community bank based in San Diego, works with more than a dozen cryptocurrency financial-services companies. Its CEO, Anthony Lane, has said he’s not a coder type but a “Joe-six-pack kind of guy” who became personally interested in bitcoin in 2013.

Cole-Frieman & Mallon, a San Francisco law firm that has gained a reputation for its work on cryptocurrency-fund formation, lists just five partners. MG Stover, a Colorado-based boutique financial-services firm, has become known for offering fund administration and accounting services. Since taking an early crypto-focused hedge fund four years ago, the firm has amassed more than 50 funds as clients, according to CEO Matt Stover.

Arthur Bell, the Baltimore and New York City-based auditor of choice for many crypto funds, recently merged with Cohen & Company. Managing member Corey McLaughlin told an industry publication the volume of firm launches in crypto is unlike anything he’s seen in two decades.

“People that were willing to take risks relatively early and stake out a little claim were able to grow significantly, while more established and larger, name-brand firms have been very quickly passed by in this area,” says Greg Gilman, co-founder of incubator and investment firm Science Inc. “You had to have guts and faith to do this 12 months ago. It didn’t require a lot of either to do this six months ago.”

Alternative Assets

Real estate investor Matt Jennings co-founded Kingdom in 2009 after he noticed that few traditional financial-services firms would allow him to hold real-estate investments in his retirement account. After the Dodd Frank Act introduced a new rule requiring funds and advisory firms to use qualified third-party custodians to hold their assets, Jennings saw an opportunity to expand into offering custodian services to the funds. In 2011, the firm got its trust charter in South Dakota, because of the state’s “business friendly” policies, according to Jennings.

Over time, the firm grew into a solid, if boring, little business. As a directed custodian, Kingdom Trust doesn’t advise clients or recommend investments—it simply holds the assets. The firm holds alternative assets in individual retirement accounts and also acts as a qualified custodian for private-equity funds, venture funds, family offices, and hedge funds. Kingdom has amassed 100,000 clients and handles around $13 billion in assets, charging fees for its services that vary based on the complexity of the assets.

Around two years ago, Jennings met Mike Belshe, a San Francisco tech entrepreneur with a cryptocurrency security startup called BitGo, through a mutual client. In working together for that client, they considered partnering. BitGo had been offering security software for individual bitcoin investors, but had seen an increase in the number of institutions needing custodian services.

Belshe and Jennings make an odd couple. Jennings, a lifelong Kentuckian, is an avid freshwater fisherman. His 19-year-old son, Coleton, was a high school fishing champion and together they co-founded a line of fishing products that includes several types of baits and lures, and a signature hair jig.

Belshe is a Silicon Valley insider, having started as a software engineer at HP and Netscape in the 1990s and later co-founding a search company that sold to Microsoft. As an early member of the team working on Google’s Chrome, he helped develop two well-known networking protocols. He avidly blogs and tweets the gospel of cryptocurrency and mentors high-school students on coding.

When they…

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