Bitgo Holdings (BTGO) risk factors, FY2025 10-K

Risks Related to Our Business, Operations and Financial Position

1. 01Our operating results have and are expected to continue to significantly fluctuate, including due to the highly volatile nature of digital assets
2. 02the financial ecosystem. For instance, if a public company unexpectedly sells a portion of the digital assets underlying their DAT strategy, even for predictable cash flow management or business operation purposes, such unanticipated sale could create a sudden price decline, market liquidations or destabilization
3. 03Transferring digital assets using our platform involves risks, which could result in loss of client assets, client disputes and other liabilities
4. 04From time to time, we may encounter technical issues in connection with the integration of supported digital assets and changes and upgrades to their underlying networks
5. 05Digital assets have been in the past, and may continue to be, a politically charged topic, which could lead to volatility or loss of business
6. 06Furthermore, changes in political priorities may result in changes in the interpretation or enforcement of existing regulations and a shift toward increased regulation could result in regulatory fragmentation and overlapping or conflicting requirements across different jurisdictions
7. 07Our perceived or actual affiliations with prominent political leaders or governmental entities could expose us to reputational, regulatory, and operational risks
8. 08We currently support, and expect to continue to support, certain smart contract-based digital assets. If the underlying smart contracts for these digital assets do not operate as expected, they could lose value and our business could be adversely affected
9. 09The theft, loss, or destruction of private keys required to access any digital assets held in custody for our own account or for our clients may be irreversible and our insurance may not be sufficient to protect us or our clients from losses
10. 10We may be unable to securely store our or our clients’ assets
11. 11The future development and growth of digital assets is subject to a variety of factors that are difficult to predict and evaluate, and they may not achieve future acceptance, grow or develop as expected
12. 12We provide staking, delegating, and related services to our clients, which expose us to additional risks
13. 13We provide off-exchange settlement services, acting as custodian and settlement facilitator for digital asset transactions executed on third-party exchanges, which exposes us to heightened operational, regulatory and counterparty risks
14. 14We may make, or otherwise be subject to, trade errors in executing client transactions or managing our own trading activities
15. 15We engage in lending activities involving digital assets, which expose us to certain risks, including borrower default, collateral volatility, liquidity constraints, and regulatory uncertainty
16. 16Although we believe we are acting solely as a fiduciary custodian, claims that we provided investment advice or encouraged specific client actions could lead to legal and regulatory challenges
17. 17We may be unable to keep pace with rapid industry changes to provide new and innovative products and services, which would cause a decline in the use of our products and services
18. 18We may be unsuccessful in our efforts to develop, maintain, and enhance our brand and reputation due to negative publicity, unfamiliarity or other reasons
19. 19We track certain Key Business Metrics, such as Number of Clients and Number of Users, which are subject to real or perceived inaccuracies as well as inherent challenges in measurement
20. 20Disputes with our clients could adversely affect our brand, reputation, business, operating results, regulatory status and financial condition
21. 21which increases our client support costs and can compound damages. For example, we have a feature called a “circuit breaker” which triggers the system to stop processing transactions for certain clients or wallets until a human can check and verify
22. 22Acquisitions and investments that we make could require significant management attention, disrupt our business, expose us to potential regulatory risks or result in dilution to our stockholders
23. 23We may fail to compete effectively against a growing number of decentralized and noncustodial platforms
24. 24We may be unable to compete effectively as we operate in a highly competitive industry that includes unregulated or less regulated companies and companies with greater financial and other resources
25. 25Due to our limited operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability or growth in any given period
26. 26Dependence on a relatively concentrated number of digital assets could expose us to significant revenue and operational risks
27. 27We may fail or be unable to retain existing clients, add new clients, or prevent our clients from decreasing their level of engagement with our products, services and platform
28. 28Our operating expenses may increase in the future and we may not be successful in increasing our revenue to sufficiently offset these higher expenses, which could impact our ability to achieve profitability or positive cash flow from operations on a consistent basis
29. 29Our strategy and focus on delivering high-quality, compliant, easy-to-use and secure digital asset-related financial services may not maximize short-term or medium-term financial results
30. 30Because our long-term success depends, in part, on our ability to expand our sales to clients outside the United States, our business is susceptible to risks associated with international operations
31. 31Failure to keep pace with new blockchain protocols or staking innovations could lead to loss of key clients
32. 32Our intellectual property rights are valuable, and intellectual property disputes or technological obsolescence could adversely affect our business, operating results, our competitive position and financial condition
33. 33We may be sued by third parties for alleged infringement of their proprietary rights
34. 34Clients using our self-custody wallets may blame us for losses due to their own security breaches, leading to disputes and reputational harm
35. 35Client misuse or inadequate education about our services could lead to losses and disputes
36. 36Our increasing engagement with retail clients, directly or indirectly, could expose us to heightened risks of fraud, regulatory non-compliance and operational challenges
37. 37Failure to comply with anti-bribery and anti-corruption laws could subject us to penalties and other adverse consequences
38. 38Our services to government clients expose us to business volatility and risks, including government budgeting cycles and appropriations, early termination, audits, investigations, sanctions and penalties

Risks Related to Our Bitcoin Treasury Strategy

1. 39Our Bitcoin treasury strategy contains various risks, including those inherent to Bitcoin and the broader digital asset ecosystem
2. 40Bitcoin is a highly volatile asset, and fluctuations in the price of Bitcoin have in the past influenced, and are likely to continue to influence, our financial results
3. 41The concentration of our Bitcoin holdings enhances the risks inherent in our Bitcoin treasury strategy

Risks Related to Third Parties

1. 42We currently rely on third-party service providers for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our clients
2. 43We route orders through third-party trading venues in connection with our BitGo Prime trading service. The loss or failure of any such trading venues may adversely affect our business
3. 44Our current and future services may be dependent on payment networks and acquiring processors, and any changes to their rules or practices could adversely impact our business
4. 45We may not be able to maintain one or more critical banking or insurance relationships
5. 46We may be unsuccessful in establishing or maintaining strategic relationships with third parties or these third parties may fail to deliver certain operational services
6. 47We rely on third-party cryptographic algorithms and blockchain protocols, which may contain vulnerabilities, errors or flaws, or experience blockchain forks
7. 48attacks or security weaknesses, as well as an inherent decrease in the level of security due to the splitting of some mining power across networks, making it easier for a malicious actor to exceed 50% of the mining power of that network
8. 49Our platform contains third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could harm our business
9. 50We use generative artificial intelligence (“AI”) tools to augment internal productivity and failure to comply with AI provider terms and the Company’s internal guidelines for the use of these tools or using such tools under non-enterprise terms could harm our business
10. 51Perceived affiliations with controversial partners in WBTC operations could harm our reputation
11. 52Multi-jurisdictional custody changes for WBTC could introduce operational and regulatory risks

Risks Related to Our Employees

1. 53The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could adversely affect our business, operating results and financial condition
2. 54Our working model, which allows a subset of our employees to work remotely, subjects us to heightened operational risks
3. 55We may not be able to maintain our innovative culture
4. 56We may be unable to prevent, or may have difficulty mitigating, employee or service provider misconduct or error
5. 57Our officers, directors, employees or large stockholders may encounter potential conflicts of interests with respect to their positions or interests in certain digital assets, entities and other initiatives, which could adversely affect our business and reputation

Risks Related to Industry-Specific Regulation and Public Policy

1. 58Policymakers are continuing to develop new rules applicable to the digital asset economy, resulting in an uncertain regulatory landscape that is subject to the potential for substantial change
2. 59Regulatory uncertainty regarding our self-custody wallets could result in reclassification as a financial service, imposing new compliance burdens
3. 60If we fail to properly perform due diligence or assess the risks associated with accepting or adopting any digital asset, or fail to monitor already accepted or adopted digital assets, we may be subject to regulatory scrutiny, inquiries, investigations, fines, restrictions, and other penalties
4. 61The recently enacted Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (the “GENIUS Act”) creates a new federal regulatory framework for stablecoins in the United States, and its implementation could materially impact our stablecoin-related business, operations, and compliance obligations
5. 62Regulatory changes or actions in foreign jurisdictions may restrict the use of one or more digital assets, staking activity, supported blockchain networks or the digital asset trading platform market in a manner that adversely affects our business
6. 63Changes in regulation enabling self-custody by exchanges and other market participants could disrupt our third-party custody business model
7. 64Our business requires obtaining and maintaining compliance with regulatory licenses and qualifications that may be costly and time-consuming to obtain and, if obtained, may subsequently be revoked
8. 65Future developments regarding the treatment of digital assets for U.S. and foreign tax purposes could adversely impact our business
9. 66services to our clients, many of our offerings are subject to significant regulatory uncertainty and we from time-to-time face regulatory inquiries regarding our current and planned products
10. 67Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, sanctions violations, illicit gambling, market manipulation, tax evasion and scams
11. 68We are, and may continue to be, subject to litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities that are often expensive and time consuming
12. 69Failures or vulnerabilities in DeFi protocols we support or integrate with could lead to client losses and regulatory challenges
13. 70Vulnerabilities in cross-chain bridges or interoperability protocols could result in asset losses and operational disruptions

Risks Related to Stablecoins

1. 71Rapid redemption requests on stablecoins we custody, particularly during market shocks or banking disruptions, could harm our operations
2. 72Instability in other stablecoins could reduce trust in the stablecoins we custody, leading to operational and reputational challenges
3. 73The adoption of central bank digital currencies (“CBDC”) could diminish demand for stablecoins, reducing our custody and related service revenues
4. 74The GENIUS Act amends the U.S. federal securities laws to explicitly exclude from the definition of “security” payment stablecoins issued by PPSIs
5. 75Supporting yield-bearing digital assets could introduce regulatory, competitive and operational challenges, impacting our stablecoin and custody solutions
6. 76Reliance on third-party reserve management for stablecoins we custody, including any lack of transparency regarding stablecoin reserves, could expose us to risks of unsound practices, redemption unavailability or other mismanagement harming client confidence and our operations
7. 77Lack of SIPC protection for stablecoins we custody could reduce client trust and demand, particularly in the event of broker-dealer failures

Risks Related to Cybersecurity, Data Privacy, and Information Technology

1. 78We, our clients or third parties we rely on may be victims of cyberattacks and security breaches
2. 79Insider threats or physical security breaches targeting our key management processes could compromise client assets
3. 80We may experience risk, liabilities or other issues relating to the development and use of AI in our business
4. 81Furthermore, laws, regulations, and industry standards applicable to AI are rapidly evolving and may require us or our third-party providers to incur significant costs to modify or enhance our business practices, services and solutions in order to comply with such requirements, which may vary across jurisdictions
5. 82We may be unable to prevent or effectively mitigate real or perceived improper use of, disclosure of, or access to sensitive data that we obtain and process
6. 83Our products and services, information technology systems, or the blockchain networks we support may incur significant service interruptions or degradation that could result in a loss of clients or funds

Risks Related to Finance, Accounting and Tax

1. 84We may be negatively impacted by changes in, or the application of, U.S. and foreign tax laws
2. 85Our ability to use our deferred tax assets may be subject to certain limitations under U.S. or foreign law
3. 86If our estimates or judgment relating to our critical accounting estimates prove to be incorrect, our operating results could be adversely affected
4. 87Our consolidated balance sheets may not contain sufficient amounts or types of regulatory capital to meet the changing requirements of our various regulators worldwide
5. 88The nature of our business requires the application of complex financial accounting rules, and there is limited guidance from accounting standard setting bodies on certain topics. If financial accounting standards undergo significant changes, our operating results could fluctuate
6. 89We are exposed to transaction losses due to chargebacks, refunds, or returns as a result of fraud or uncollectability
7. 90Our tax information reporting obligations with respect to digital asset transactions may be subject to further scrutiny in light of changes made to the U.S. and global broker reporting regime for tax reporting
8. 91January 1, 2025, and in certain other cases starting January 1, 2027. The Final Regulations introduced new rules related to our tax reporting and withholding obligations on our client transactions
9. 92Our exposure to credit risk with clients, market makers, and other counterparties could result in losses
10. 93We may require additional capital to support business growth, and this capital might not be available

Risks Related to Ownership of Our Class A Common Stock

1. 94The market price of our Class A common stock may be volatile, and could decline significantly and rapidly. Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation
2. 95The dual class structure of our common stock may adversely affect the trading market for our Class A common stock
3. 96Although we do not currently intend to rely on any such exemptions, we may do so in the future and if we utilize any of the “controlled company exemptions,” you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of NYSE
4. 97Sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline
5. 98If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and its liquidity could decline
6. 99Our Bylaws contain an exclusive forum provision for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees
7. 100Adverse economic conditions could adversely affect our business
8. 101We may be adversely affected by natural disasters, pandemics, and other catastrophic events, including by non-naturally occurring events such as terrorism
9. 102We are exposed to fluctuations in currency exchange rates
10. 103Interest rate fluctuations could negatively impact us