Bitgo Holdings, Inc. ($BTGO)

Hello, everyone. Thank you for joining us, and welcome to Bitgo First Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the call over to Rachel Dye, Head of Investor Relations. Please go ahead.

Hello, everyone. Good afternoon. Thank you for joining Bitgo's Q1 2026 Earnings Conference Call. Our remarks today will include forward-looking statements, including those regarding our future operating results and financial condition, such as our business strategy, market growth and objectives for future operations. Actual results may vary materially from today's statements. Information concerning risks, uncertainties and other factors that could cause these results to differ are included in our SEC filings, including those that are stated in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025, and in our other filings with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements. Additionally, the matters we discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. Joining me today on the call are Mike Belshe, Founder and CEO; as well as Ed Reginelli, CFO. With that, I will now turn the call over to Mike.

Thank you, Rachel, and thank you, everyone, for joining us. We delivered strong underlying business performance in Q1 despite continued softness across the broader digital asset market. While market activity created pressure on our headline financial results, underlying monetization across the businesses remained strong, and we continue to gain market share across assets under custody, trading volume and several of our product verticals during the quarter. We also continue to invest across product platform and go-to-market capabilities while making meaningful progress across several strategic growth areas that we believe will matter over the long term. Before I go deeper into the quarter, I want to address an important point regarding the accounting presentation of our results as we expect this will be an area of investor focus. Bitgo, today, operates multiple businesses across trading, staking, financing, Stablecoin infrastructure, settlement and other related services. Under GAAP, different parts of the platform are recognized differently for accounting purposes with certain activities reflected on a gross basis and others reflected on a net basis. As the business continues to scale and diversify, reported revenue alone does not always capture the underlying economics or monetization profile of the platform. At the start of January, we launched derivatives within our digital asset sales business. Adoption has been encouraging with approximately $3 billion in notional derivatives trading volume in Q1 alone. As a result, a portion of our client activity shifted from spot trading to derivatives products. That mix shift matters when evaluating our reported revenue because spot trading activity is reflected on a gross basis, while the derivatives are reported on a net basis. As a result, the sequential decline in total revenue does not fully reflect the underlying platform economics and reported revenue comparisons to prior periods are not directly comparable. More broadly, we believe investors should evaluate the business through the underlying margins, take rates and net economics after direct transaction-related costs associated with each of our core revenue streams. We are building institutional grade digital asset infrastructure, the secure regulated control layer that institutions rely on to build within digital assets. Our clients increasingly want integrated workflows across regulated custody, trading, financing, settlement, stablecoin infrastructure and related services through a single trusted partner. We continue to strengthen that foundation throughout Q1, and we believe its importance will only increase as the market matures. We view custody as the entry point to the broader Bitgo platform and the foundation of our client relationships. Clients establish trust, bring assets onto the platform and increasingly expand into our other products and services with a single integrated framework. This land-and-expand strategy is central to how we deepen client engagement. It's how we increase workflows across the platform and drive long-term platform value. We also continue to see growing participation in the space from traditional financial institutions, including asset managers, issuers and other large counterparties. In our view, this remains one of the most important long-term tailwinds for Bitgo. These institutions are generally not building infrastructure from scratch. They are looking for trusted partners that can support digital asset adoption in a regulated and scalable way. This is exactly where Bitgo is focused and where we believe we are differentiated. Our advantage is the combination of regulatory standing, security architecture and the breadth of capabilities we provide within a single integrated platform. Operationally, this was reflected in a continued deepening of client engagement across the platform, increasing our number of clients served to 5,569, up 42% year-over-year, and users to 1.2 million despite broader market headwinds. Reported assets on platform at the end of Q1 were approximately $63 billion and reported assets staked were $11.8 billion, both down from prior periods in dollar terms, primarily as a result of lower digital asset prices during the quarter. Because digital asset prices can materially impact reported asset values, we also evaluate underlying asset growth on a price normalized basis. We believe this more accurately reflects the fundamental growth of the business, client inflows and Bitgo's continued market share gains independent of the market price movement. Using current quarter digital asset prices across all periods, normalized assets on platform actually grew 29% year-over-year and 10% sequentially. Normalized stake balances grew 21% year-over-year and 27% sequentially. Bitcoin and Ethereum balances on the platform grew 131% year-over-year and 7% sequentially. Taken together, we believe these demonstrate continued underlying momentum across the business despite the broader market volatility. Let's now dive into some key operational and commercial highlights from quarter 1. A key focus throughout Q1 was continuing to broaden the reach of our institutional platform through expanded commercial relationships and partnerships. For example, in Q1, we significantly expanded our partnership with 21Shares, one of the world's largest issuers of cryptocurrency exchange traded products. This highlights the underlying demand for regulated crypto exposure in key markets around the world, including throughout Europe and builds upon Bitgo's existing markets. Additionally, just a few weeks ago, we announced plans with OKX, a leading crypto exchange to bring automated off-exchange settlement infrastructure to institutional clients trading on OKX in the U.S. This is an example of Bitco helping solve structural challenges for institutional trading, which has historically required institutions to prefund assets on exchanges and take counterparty risk against those exchanges. It addresses the growing demand from institutions to separate custody from trading risk. We believe this is a major milestone for the industry, clearly establishing Bitgo as the leader in institutional settlement. Beyond these announced partnerships, we also deepened relationships across a broader set of institutional clients, exchanges, asset managers and ecosystem partners during the quarter, including several strategic engagements that have not yet been publicly disclosed. These partnerships are important not simply because of their headline value, but because they reflect the increasingly strategic role Bitgo plays within the institutional digital asset workflows. They demonstrate that institutions are choosing Bitgo, not only for custody, but as a premier core infrastructure partner to support broader operational and financial activity. Throughout the quarter, we continue to extend our product capabilities into strategic growth areas. As I touched on earlier, we launched derivatives trading in January to support growing client demand for tools to help manage volatility, hedge exposure, generate yield and structure risk more efficiently. Adoption in the first quarter of launch has been encouraging, and we have already seen meaningful engagement across the platform. Importantly, some existing spot clients are now incorporating derivatives into broader workflows within Bitgo, which is exactly the type of cross-product adoption we want to drive over time. Stablecoins is another area where we made meaningful progress and where we continue to see significant long-term opportunity. We have said consistently that stablecoin infrastructure can become one of the most important growth areas for Bitco over time, and this quarter reinforced that view. Stablecoin infrastructure is one of the clearest examples of how Bitgo's platform extends beyond trading into broader financial and payments workflows. During and shortly after quarter end, we launched Bitgo Mint, a one-stop portal where clients can mint, burn and convert stablecoins from one type to another. We also continue to support clients and partners across reserve management, transaction processing and the broader operational stack around stablecoins. When we look at client conversations today, the range of stablecoin use cases is getting broader across payments, treasury management, settlement, tokenized asset infrastructure and embedded financial applications. We believe Bitgo is well positioned to benefit from these trends, and we're pleased to announce several stablecoin-related commercial partnerships, including with StableCe, SoFi and the Better Money Company. On financing and broader institutional workflows, we launched our unified financing platform and further expanded prime services capabilities, including additional risk management, structured products, financing and treasury tools. These investments are strategically important. Each time we add a new capability that helps clients keep more workflows inside the Bitgo ecosystem, we deepen client engagement, increase the overall utility of the platform and make Bitgo more central to how those clients operate. Geographic expansion has also remained an important priority. This quarter, Bitgo was named issuer and primary custodian for FY USD, a U.S. dollar-backed stablecoin designed for institutional adoption across Asian markets. In Europe, beyond the 21shares partnership, we added new traders to Bitgo Prime's liquidity network in April, improving execution for our clients on our regulated infrastructure. I'd like to now provide some context on the financial results before I hand this over to Ed for a more detailed discussion. We were not insulated from the market environment. Softer market conditions reduced activities in parts of the business, and the noncash markdown on our digital assets treasury weighed on GAAP earnings. However, despite this environment, the underlying economics of the business remained resilient relative to broader market conditions as they were supported by continued market share gains, improved monetization across several of our core business lines and ongoing client engagement across the platform. At the same time, we continue to invest in the strategic areas we believe will drive durable long-term growth, such as product, platform, regulatory capability and go-to-market execution. Having operated through multiple up and down cycles in our 13-year history, we believe periods like this often create the best opportunities to strengthen the business and deepen our long-term competitive position. Looking ahead, some parts of the business remain sensitive to market activity and token prices, while other parts are benefiting from onboarding product expansion and continued traction with clients and partners. Ed will take you through that in more detail, including the financial bridge for the quarter and the key drivers across each business line. Before I hand it over, I want to close with a broader perspective on where we see the industry heading. Institutions continue to move into digital assets. Stablecoins continue to become more relevant to real-world payments and financial workflows. Tokenization continues to create new infrastructure needs. At the same time, regulatory clarity continues to improve across key jurisdictions, including constructive momentum in the United States around market structure and digital asset legislation such as the CLARITY Act. We believe greater regulatory clarity is one of the key factors that can further accelerate institutional adoption and Bitgo's total addressable market over time, particularly as traditional financial institutions seek clearer regulatory frameworks before committing additional capital and resources into the digital asset market. As the market matures, clients increasingly want trusted, regulated integrated partners rather than fragmented, piecemeal solutions. We believe those structural trends continue to support the long-term demand environment for Bitgo. Periods like this often separate businesses that are simply exposed to market activity from businesses that are building durable value. Our role is not to call the market. Our job is to continue strengthening the platform, deepening the client relationships and positioning the business to emerge stronger as adoption expands. We did that in Q1. Now I'll turn it over to Ed.

Thank you, Mike, and thank you, everyone, for joining us today. Let me start with the consolidated financial view and then walk through each of our major offerings. In the first quarter, total revenue was $3.8 billion, up 113% year-over-year and down 39% sequentially. The year-over-year increase reflects a larger digital asset sales business and a broader contribution from Stablecoin as a Service relative to prior year quarter. The sequential decline was primarily the result of lower digital asset sales activity and a soft crypto market environment. As Mike noted, the headline percentage change overstates the decline in trading revenue as a portion of spot trading activity has shifted to derivatives, which are reported on a net rather than gross basis. For that reason, we do not think that analyzing total revenue alone fully captures the underlying economics of the quarter. While total revenue declined 39% sequentially, direct costs also declined at a similar rate. At the same time, margins and take rates improved across digital asset sales, staking and Stablecoin as a Service. As a result, the sequential decline in total revenue was more pronounced than the change in the underlying economics of the business. Adjusted EBITDA loss was $1.7 million in the quarter compared with a positive $3.9 million in Q1 of last year and a positive $12.1 million in Q4. The year-over-year and sequential change reflected weaker market conditions, lower subscriptions and services revenue and continued investment in the business. It also included approximately $3 million of onetime legal, professional costs and other onetime charges associated with the IPO process and other strategic initiatives. GAAP net loss was $60.7 million in the quarter compared with a net loss of $25.7 million in Q1 of last year and a net loss of $50 million in Q4. The primary driver of that result was negative mark-to-market adjustments on digital assets as well as elevated IPO-related stock-based compensation expense, which we expect to normalize from Q1 '26 levels going forward. Let me now move to the offerings, starting with digital asset sales. Revenue for digital asset sales was $3.7 billion, up 128% year-over-year and down 39% sequentially. While overall trading activity reflects a weaker market environment, the underlying economics of the business improved during the quarter. On a normalized basis, excluding the accounting impact of the derivatives mix shift, our underlying trading economics outperformed the broader market sequentially and significantly outperformed on a year-over-year basis. We believe this reflects continued market share gains in institutional digital asset trading. Overall margin was 32 basis points compared with 20 basis points a year ago and 24 basis points in Q4, primarily driven by the contribution from derivatives activity following the launch of the offering on January 1 of this year. Strategically, we view derivatives as an important extension of Bitgo's platform. Clients increasingly want integrated workflows that include risk management, hedging, yield generation and structured solutions alongside spot execution. Expanding those capabilities strengthens client engagement and increases strategic relevance of our trading platform over time. Turning to staking. Revenue was $49.4 million, down 66% year-over-year and 15% sequentially, primarily reflecting lower token prices. Staking take rates increased 16.1% from 7.6% in Q4 and 12.5% in the prior year quarter, driven by additional token onboarding and a more favorable validator mix, including the contribution of the higher economics of the [ Canton-related ] activity. While the current mix may vary over time, the broader takeaway is that we are improving the economic quality of this business line while continuing to expand token support. Subscriptions and services revenue was $25.6 million, up 11% year-over-year and down 35% sequentially. The sequential decline primarily reflected a lower level of onetime ecosystem and implementation-oriented projects compared with Q4 when activity in this area was elevated. While these projects are not recurring in nature, they remain strategically important because they often support token onboarding, client implementations and broader downstream revenue opportunities across the platform. As a result, we do not view the sequential revenue decline as representative of the underlying health of the recurring revenue base. Stablecoin as a Service continued to be the bright spot during the quarter. Revenue was $38.2 million, up 44% sequentially. Take rate improved to 7.4% from 5.5% in Q4. Growth was driven by continued client adoption, product enhancements and new partnerships. We view stablecoin infrastructure as a significant long-term growth opportunity for Bitgo, supported by expanding adoption across payments, settlement, treasury management and broader financial applications. Finally, interest income was $0.9 million, up 259% year-over-year and 89% sequentially. Turning now to expenses. The most important point is that the quarter reflects both temporary and strategic factors. We incurred approximately $3 million of onetime legal and professional fees related to the IPO process and other strategic initiatives. Our stock-based compensation of $11.2 million was also elevated during the quarter compared to $0.8 million in Q4 of 2025. We expect a moderation in share-based expense on a go-forward basis. During the quarter, we continued to invest in talent, product development and platform capabilities as part of a deliberate long-term strategy. We are managing the business with discipline, but we are not managing the business to maximize 1 quarter of profitability at the expense of our long-term growth opportunity. Our balance sheet remains strong, including approximately $186.6 million of cash and $167.1 million of Bitcoin held in treasury on the balance sheet as of the quarter end. Combined with our capital-light model, this provides the flexibility to invest through the current cycle, support client activity across the platform and pursue strategic growth opportunities from a position of strength. I'd also like to briefly touch on the higher interest expense in the quarter. This reflects funding used to support customer borrowing and lending activity on the platform. Importantly, this was operational in nature rather than corporate financing and helps enable revenue-generating client workflows within the business. Moving now to our outlook for Q2 2026. Based on quarter-to-date trends, we are assuming that digital asset market conditions will remain broadly consistent with current levels, building on the stronger performance observed at the end of the first quarter. Digital asset sales revenue is expected to remain broadly consistent with Q1 with margins anticipated to be comparable, assuming a similar mix of derivatives and spot trading activity. Current trends indicate strong year-over-year growth for the quarter. Staking revenue is expected to remain broadly consistent with Q1, supported by continued growth in staked assets despite ongoing price volatility in key tokens. Subscriptions and services revenue is expected to grow sequentially on a reported basis, supported by client growth across custody and wallets while also benefiting from nonrecurring ecosystem and implementation-related work. Stablecoin as a Service revenue is expected to grow modestly sequentially, supported by ongoing client adoption and new partnerships. Total expenses for the second quarter, excluding direct costs associated with digital asset sales, staking and Stablecoin as a Service are expected to decrease from Q1 levels, which were driven by IPO-related charges during the quarter and normalization of stock-based compensation. The company will continue to invest in long-term platform growth and go-to-market execution. With that, I'll turn it back to the operator to open the call for questions.

[Operator Instructions] Your first question comes from the line of James Yaro with Goldman Sachs.

I'd love to just get a little bit of an update around the Stablecoins as a Service demand from partners. And I guess, how this has evolved as the CLARITY Act progresses? And then maybe longer term, how would you expect the Act passing to impact the demand?

Thanks, James. I appreciate the question. Good to speak to you all. In terms of stablecoins, continues to grow strong. I mean, basically, everybody is out there looking at CLARITY and GENIUS, which doesn't allow interest. And so if you have a broad distribution of users at your bank or financial institution, you're faced with a choice. Do you, a, launch your own stablecoin and then be able to participate in the yield, use it with your partners, use it for your business in some way? Or do you give that up to somebody else who's going to instead take that. So in general, just strong interest. I know others have cited lengthy pipeline. We've got a couple of deals we can't announce yet, but continues to look really positive. Also, we did just extend our USD1 contract. So we're happy that, that partnership has been doing fantastic.

That's really helpful. Maybe just as a follow-up, sort of a similar question around tokenization facilitating tokenization projects and how you see the opportunity set for your business there?

Look, I think tokenized equities have really exploded in the last 6 months. There's at least 4 kind of different models for how to bring tokenized equities to market. We're proud that we participated -- we're participating with all of them. We are infrastructure. So one of the benefits of being infrastructure is that we participate on all of these, and then we work with the clients to kind of towards them. I think the market is going to figure out which of these work best. So the first one that we're proud of is we are the sole custodian within the Figure markets ecosystem, and they started, I think, in February. Obviously, they've got one model which uses Providence and Figure's ATS. So that's been kicked off. On top of that, there's tokenized wrappers that exist. There's a couple of different players pursuing that. You saw DTCC just announcing that they've got a plan to go to market. We will be participating with all these. And we think it opens up our business tremendously kind of towards how we grow in the direction of prime brokerage. So anyway, we're very excited about this. We're heavily investing in it and more to come.

Your next question comes from the line of Pete Christiansen with Citi.

I appreciate the question here. Mike, back on Stablecoins as a Service. To what degree is Bitcoin involved in the design and construction of the networking, meaning connecting with other partners, which may not be part of the Bitgo client ecosystem? My thinking is there's an opportunity from a lead gen perspective for services with Stablecoins as a Service emanating from one particular client to others. Just wondering if you could provide some color on that. And curious on any learnings here on scaling this business and what it could mean for potentially launching L1 as a Service at some point?

Great. Thanks, Pete. Let's see, on the first point about stablecoins, I'm glad you're hitting this. It's a little bit of a subtle point, but one of the advantages that Bitgo has with the large client base is that anyone that launches their stablecoin directly with Bitgo immediately plugs into an entire network. And if you recall, at the bottom of our stack, we have our self-custody wallet platform that's distributed all over the planet. Hundreds of exchanges and broker-dealers are using that. As soon as you light up on the Bitgo API, you light up on all of those parties. Additionally, I think some of the traditional folks that are coming into the space are a little bit more -- if you want to use Peter Thiel's analogy of 0 to 1, they're really more like the one to many and Bitgo is kind of like the 0 to 1. I do think it's a different skill set of how do you take a product which currently isn't deployed and get the flywheel spinning and grow it. So Bitgo's got tremendous reach into the DeFi ecosystem, into the crypto ecosystem. Obviously, we've got partners and hedge funds and venture funds and all others. So when folks use the Bitgo platform for stablecoins, we definitely are actively working with helping them. And you've seen historically, there's been a few stablecoins that launched several years ago, and they pretty much stayed kind of at 0 for a long period of time. And that's because of not having necessarily really good go-to-market plans. So we definitely help our clients with this. We're motivated and interested and incentivized to do so. And I think that's one of the advantages of using the Bitgo stablecoin platform. I'm sorry, you had a second part of the question. What was [indiscernible]?

The potential of taking learnings and the capabilities that you have with Stablecoins as a Service to potentially offering L1 as a Service at some point.

That topic has come up quite a bit. I think some of the new L1s, particularly around stablecoins are hitting a new need that the kind of the first generation of L1s didn't solve. And that's the ability to pay fees in kind of stablecoin. So both Tempo and Arc, as you're probably aware, if you're moving your stablecoin, whatever fees you pay to the chain, you actually can pay in the stablecoin itself, whereas when stablecoins are moving on Ethereum or Solana or whatnot, you always have to -- in addition to having the stablecoin, you have to have a little bit of the L1 token. So I think these innovations are going to -- frankly, they're kind of just required. I mean it's annoying and a nuisance to have to pay kind of a foreign fee in order to move a stablecoin. As for Bitgo's own ambitions, there could be something. We have not announced anything publicly yet, but stay tuned.

Your next question comes from the line of George Sutton with Craig-Hallum.

This is Logan Hoffman on for George. Mike, I wanted to start with sort of a specific one on Canton. Obviously, you were an early supporter there, and you made a few announcements since kind of this year expanding that partnership. It seems like a blockchain that we keep hearing a lot about and it's kind of getting more business. So I wonder if you could just walk through some of the different ways that you're set to benefit from their growth and just kind of give us a sense for where that relationship could go in the future.

Sure. Thank you for the question. Look. So Canton, I mean, it has been a big supporter of digital asset, DRW Don Wilson for quite some time. We're proud to be the only qualified custodian on the network today. Canton deserves credit for really addressing early some of the institutional complaints that come with building applications on blockchain, in particular, privacy, in particular, how you receive assets, there's been concern about transactions on Bitcoin, Ethereum, et cetera. And they solve these problems. And so they've been able to bring in a number of people. They also are, I think, having kind of a second-mover advantage in terms of understanding how to distribute their own token in a way that's fair and helps incentivize the network and grow before having it kind of hit the market and liquidate and cause issues. So I think they're well poised. The privacy, they're kind of the only permission privacy chain in town right now. And with the growth they've had, I think they're looking good. In terms of Bitgo, one of the things that's interesting about Bitgo and often difficult to describe is going into depth on a particular coin or an asset. I mean we'll say that, hey, Bitgo has wallet support for pick your favorite coin or we have staking support. And it's easy to say we have the wallet, we have the staking. But there's also a lot of depth that goes into that, like what features do you support on that coin? What -- how many staking providers are you interoperable with? Like what flexibility do clients have? And part of how we grow is by making sure that we can meet all of our clients' needs. So one example, specific to Canton, it's kind of a funny one, I think, but it's also really important. I mentioned the dust transaction. So traditional finances often worried, well, like what happens when you're a financial institution you receive these dust transactions on this open network. And what if you didn't want it? What if it's from a bad guy? And how do you deal with that? Now my own personal opinion is that in practice, these are not significant issues, but these really do trip up regulators, legal teams extensively. Canton has a feature where you can accept all the deposits and approve them. And so Bitgo is not just integrated with the chain. We actually implement that feature. That particular feature then creates the demand for more features. It turns out that it's a little bit annoying to constantly have to approve every transaction that comes in. So then they want white listing and ability to kind of approve those and batch and things like that. So we build those. Anyway, I think we're well poised. I think we're happy that we have the large network on Canton in terms of -- we're able to integrate with GO network and other things on the go forward. That should just continue to expand.

Got it. Helpful color. Second, just a quick one for me. I mean kind of putting the reporting differences aside, are you able to just kind of walk through how the net economics on spot volume compared to derivatives volume compare for you guys? Just want to get a better understanding as this shifts over time, kind of what we'd expect to see on that net revenue line.

I'll hand it to Ed in just a second, but some quick color. I think in the crypto markets, you will see the same thing that's happened in other markets. Derivatives tend to be a better way, more economic way to trade in the industry. And so the volumes on the derivatives side will continue to grow and eventually far outpace the spot markets. So we already saw in Q1 some conversion from spot market trading over to derivatives trading, which was expected, and we hope to continue to grow that. So for just kind of 1 quarter of offering, we think that the results were pretty good. And we think that, that will continue. And then, of course, kind of our margin on a derivative product is higher than what you have in spot markets. So we're happy about that as well. Ed, do you have anything to add?

No. I mean we were, as Mike mentioned, very excited to extend some more product within our trading platform. We -- really strong client adoption, and we're still very -- still excited about the spot trading business. Year-over-year, we have seen tremendous growth. We did go down sequentially, and that was really just due to the fact that in Q4, we had exceptional volume from a few key clients. But overall, we're excited about trading and expanding our capabilities and extending product launches there.

Your next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Maybe just on kind of the segment stuff, the subscription services sequential decline was a bit more than I was anticipating. And I know you guys called out maybe it was due to lower onboarding or implementation fees. But could you maybe provide some just color on the underlying strength in that business? I know the number of kind of clients continue to increase. How did the subscription services do outside those maybe onetime nonrecurring fees?

Thanks, Brett. First off, on the onetime recurring fees, just so people understand what those are. As we take on new coins and build them, sometimes they've got particular technology components that are expensive. And so we do charge blockchains and others onboarding fees to do that. However, what we really want to make our impact in the world is with the ongoing recurring revenues that come from real clients. So yes, the onetime components came down. On the subscriptions and services, I think it's been in line with where we would have expected it to be other than that we had less of the onetime fees. The other thing I would point out is, increasingly, we are wanting to move the revenue kind of up the stack, as I mentioned before, the custody fees and subscription fees by themselves, that's kind of a cost center to our clients. However, paying fees as our clients are doing work with trading and with staking and with borrowing lend, et cetera, those are where they're making money. So it's a much more palatable place for our clients to pay us fee. That does change the mix a little bit. And it's one of the challenges of describing the business is that we have multiple products and services. And I don't have the stat, maybe Ed has the stat, but we shared previously about 72%, 73% of clients are using 2 or more products, and then over half the clients using 3 or more products. So we think that really, if we can bring clients in and we lead with custody is the way they come in and it's usually what we're known for, but they grow into these other products and services, and we think that's the strength. Ed?

We've seen tremendous growth in number of clients utilizing our custody and wallet products, and that's somewhat of a recurring revenue stream. So that story remains very strong. But again, the big story there was in Q4, we did experience a very large volume of ecosystem projects. Excluding that, the business performed very strong year-on-year, first of all, and then also sequentially. So overall, we're still very optimistic about our customer pipeline and that business -- that part of our business growing.

Awesome. And maybe if I could just follow up on the safety side. Go ahead, Mike. Another point on that.

Sorry. The -- one of the things I would like to figure out to do really well with all of you guys is how do we differentiate the Bitgo performance from the market price volatility performance. And obviously, we don't consider ourselves to be a huge impact on the latter, although hopefully, we have an impact to some degree. But really, we want to focus on the former. So the normalized numbers that we discussed on the call, I think, looked pretty encouraging. As long as we are -- and it doesn't really matter where you pin the prices, you can pin it to the beginning of the period at the end of the period. In all cases, we saw significant growth, both on the assets on platform and also on the assets under stake. So the revenue that we'll get on the just the custody component will be down from the U.S. dollar notional -- sorry, the U.S. dollar pricing. But in terms of the actual assets on platform, we see good growth there. So we're happy about that for the future.

Helpful. And then just on the staking front, obviously, asset stake decline that's general declines in asset prices. But it looked like the take rate there ticked up a good bit if I'm just doing kind of beginning of period and the period average, almost like doubled quarter-over-quarter. I guess, did you guys take up pricing on the staking side?

Yes. We had a couple of different things. We had a change in the mix of some of the partners that we work with and then also some of the coins are stronger in terms of the rates we get on those. So those have been positive for us. And then lastly, as we did note on the call, on a normalized basis, the overall assets under stake did grow. Remember, the assets that you stake is basically the non-Bitcoin assets, which is like the one set of assets are even more volatile than Bitcoin. So Ed?

I guess thing I will add to that is the -- what was I think you covered it, Mike. I know I was going to say the only thing I would add is in addition to a positive validator mix. As we get to a certain size and volume with certain coins, we're able to push a lot of that staking capability to our own nodes where we appreciate a much higher margin. So that's also helping support the margin growth.

Your next question comes from the line of Ed Engel with Compass Point.

Question on the increased stablecoin take rate. Any more color on what's driving that? I know that there's moving pieces between partnership mix and then, I guess, maybe some transaction revenue. I just want to kind of get an idea of if transaction revenues actually starting to drive that business rather than just interest income.

Actually, I think it's mostly that kick starting the business. We actually gave some discounts kind of on the early piece when coins are growing. And then now we've kind of graduated beyond that. So the take rate just goes up as a result of that. That's the main one. In terms of stablecoin conversions, we do a lot of stablecoin conversions. Those are relatively low margin, and those show up more in the trading side rather than under the stablecoin numbers.

Great. And then I guess on the OKX integration for off exchange settlement, it kind of seems like it's just a matter of time before this structure becomes kind of the standard industry. Just curious how do these integrations, I guess, help the business just economically? Is there -- is it more of a way to kind of gain and maintain market share or actually would monetize some of those trading fees?

Yes, great question. What part of it is you get the access on platform and then you have the opportunity to address those clients in many ways. So we are trying to help make the settlement network just be the strongest, largest volume that's out there. And the most important place to be is on the largest exchanges. So the big 3 is Finance and OKX and Private. So this is one of the big ones, and we're really excited about the fact that we have it. And then in terms of how we make money, I think one of the elements of the crypto industry that hasn't been fully considered through most of our 10-year history is how to price risk. So remember, when you're doing trading, there's 3 components of pricing. Number one is, okay, what's the cost of the underlying asset that you're trading. Number two is how much profit do you want to take, 5 bps, 10 bps, 100 bps? And then the third one is, what is your risk? And because crypto markets are highly volatile, relatively new, require prefunding out of exchanges, the measurement of that risk is super tough. And of course, the industry has seen big penalties like what happened when FTX had a blowout back in 2022. So the main thing that our clients get out of having off-exchange settlement is reduced risk and the ability to start actually measuring and quantifying the risk so that they can get their prices right. I think so far, what's been happening is we have really wide margins on the profit side and then people just say, well, that's big enough. It will cover some of the risk that I'm taking. Now with the ability to trade without having to prefund various venues, you take out that risk and you can start to quantify it for real. So this is going to bring prices kind of back. And we see Charles Schwab came in, I think what were they going to be at 75 basis points on their retail trading? And then Morgan Stanley has now announced that they're going to do 50 bps on their retail trading. As they bring their rates down, they are going to increasingly have to figure out how they're going to measure and control the risk that they're taking. And I think they're going to find Bitgo settlement network to be a very satisfying place to be.

Your next question comes from the line of Brian Dobson with Clear Street.

So at the top of the call, you spoke a little bit about growing your share of the clients' business organically over time. Can you give us a little bit of color on what that looks like and how you're thinking about client acquisition costs?

Yes. Look, it's been one of -- thank you, Brian. It's been one of our key metrics since our IPO day back in January, I mean, before that internally. Look, overall, the market is simply expanding and what started out a decade ago as primarily Bitcoin and then expanded into a few other assets and then ICOs and now it's grown into stablecoins and DeFi. It's about to go into tokenized equities. So the more clients you have on the platform, the more it means that your clients are going to be able to match each other on the settlement network and what not. So we look for partnerships where we can have a partnership that brings on more clients. The OKX platform -- sorry, OKX integration is no exception. By doing that deal, we can now work to find clients that we have in common. Sometimes we're helping OKX with getting more clients. Sometimes they're helping us with getting more clients. Yes, basically, anywhere that we can find a partnership where one client gets more clients, we consider that a win.

Your next question comes from the line of Joe Vafi with Canaccord Genuity.

Just maybe we talk about the loan book a little bit, how you're thinking about that strategically, where it may go from here, how it's performing here in the spot volatility market? And then a quick follow-up after that.

Thanks, Joe. Ed, do you want to answer where we're at right now? I'll answer after that.

Sure. Yes. So the loan book is currently roughly around $200 million outstanding with client-facing. We believe there's an incredible opportunity ahead of us. As we had mentioned, Joe, in the past, that our problem is we have more demand [ than ] we have supply of dollars to lend. A lot of the clients are looking for U.S. dollars to borrow. So we try to find unique ways of bringing in additional dollars. Obviously, the IPO was very helpful in bringing in some additional funds to the company to support the program. So we'll continue to keep building that program. But again, the opportunity that we see there is huge.

And then just adding this is part of why I'm excited about the tokenized equities is, like, I think, there's tremendous demand to borrow against fully collateralized positions against all kinds of things. And while there was a healthy market borrowing against fully collateralized Bitcoin, there's a lot more people that have equities that they would be willing to apply towards this than there are people that are holding just Bitcoin. So we think it's going to greatly grow the market once we've got tokenized equities on chain.

That's great. I didn't actually think about that, Mike, and opening up that margin lending market on tokenized equities. And then just maybe kind of talk about a little bit of the mechanics of maybe some of your customers switching some trading volume from spot to derivatives. It feels like if they wanted to do derivative trading volumes, they could perhaps have been doing those away from you to begin with. So just wanted to drill down on the motivations of clients of that mix shift from there.

Thanks, Joe. Look, one of the least sexy things that we do, but probably the most important things that we do is getting the regulatory right behind what we do at Bitgo. So our clients very much appreciate that we are OCC Chartered National Bank. They very much appreciate the regulatory standard that we have across the globe, whether you're talking about Germany or Dubai or Singapore. And in general, once they've gone through the onboarding and diligence process with Bitgo, it's difficult to replicate that with multiple partners. So you're absolutely right. They could have traded in derivatives last year, the year before with a number of different parties. Oftentimes, that means opening accounts offshore. Oftentimes, that means just opening accounts with crypto-native firms that may not match the kind of profile that they're looking to work with. So the desire to have this one-stop where they come to Bitgo, we are their counterparty. They know who we are. They've been through our insurance. They've been through our SOC 1, our SOC 2 and all of our regulatory analysis, and now they're ready to do these activities. So you're right, they would have participated before. They just didn't have quite the right partner, and they're very happy to have Bitgo.

[Operator Instructions] Your next question comes from the line of Chris Brendler with Rosenblatt.

Just wanted to dig a little deeper on the derivatives business. Obviously, it's still early days, but a good start for that business. And I just wanted to know, as you think about the impact on the net margin there, is it safe to assume that the increase you've seen there is the majority of the increase you've seen there or maybe all of the increase we've seen in that net capture rate has been due to the addition of derivatives revenue without a diameter impact? And then can you talk at all about how you expect that business to contribute in the second quarter? And then I also have one follow-up on the Stablecoin-as-a-Service business, just more detail on the growth in partners there and how the book will look as you grow away from just having the World Liberty and how significant are the non-World Liberty assets expected to be as you progress through the year?

Thanks, Chris. I can add.

Yes. So the take rate or the margin that we saw during Q1, as we referenced, was benefiting from the net reporting of derivatives. If you just look at the spot business, it's very consistent to what we experienced in Q4. So those margins haven't varied very much, and we will continue to experience that into the future. As we get more and more of the derivative trades, that will hopefully help influence our net take rate much higher to the future.

And then on the stablecoins, I'm not sure how to quite answer it. We do have some clients that we can't preannounce. It's unfortunate. So we can't announce clients that are not ready to be announced yet. So unfortunately, I'm going to have to ask you to stay tuned. On the -- I guess one thing I didn't mention, but you probably have seen it. This last quarter, we did launch what we call our Mint and Burn Center. It's a place where all of our 5,600 clients and Mint and Burn directly in the assets that are straight from Bitcoin. We've got partnerships. The intention is not to limit it to just the Bitgo stablecoins. And then you can convert between stablecoins all kind of right there. Additionally, you can do it programmatically, so it's super easy. If you've got your agentic bots running, they can completely through API, do these types of conversions as well. I think there's probably more agentic announcements that have happened so far than real meaningful deployments, but we do see this as an important part for the future.

Your next question comes from the line of Dan Dolev with Mizuho.

Really nice results here. Congrats from us. I have a question on the Bank and Trust. So Bitcoin now holds Bank and Trust, National Bank Charter from the OCC. This puts you, in our view, in a pretty exclusive category amongst crypto-native firms. So maybe beyond the obvious trust and compliance signaling, what does the charter concretely unlock in terms of new revenue lines?

Thanks for asking. Actually, by the way, one thing I'd like to impress upon folks that may not be aware of kind of Bitgo's history, I think we might be the first OCC charter bank that converted in a day. And usually what happens is -- and there's a lot of people that are in the application process with the OCC. Usually what happens is you get a conditional approval and then it can be like 9, 12, 18 months while you go and build the necessity at the OCC level of a bank. In Bitgo's case, we were conditionally approved. We had to write a check to fill the regulatory capital, and the next day we were operating. So doing these activities is something we've been doing for a long time. And so to answer your question, the reason that's important is because, when we built Bitgo Trust Company out of South Dakota back in 2018, it was pretty limited in scope of what it could do. I mean all we wanted to do was to be able to kind of hold these assets in a fiduciary manner in a way that was bankruptcy remote that was safe for our clients, our institutional clients to understand. But then every time we wanted to do something new, it was like more licensing. It was more updates to the business plan, working with the regulators, and it was expensive. So as we went into the OCC process, we put everything in there. So from trading to staking to, of course, custody, et cetera, these are all things that the regulator is familiar with in our business. It's part of our business plan that the OCC has worked with us on. And by the way, they've been great, really appreciative of their efforts there. So overall, we feel like we've got that standing with that OCC charter and the business plan that's approved in there. So is pretty all-inclusive. So I don't know if you had a particular area that you wanted to drill into, but I mean, look, obviously, the services that we have up on top of custody already, those are where we're growing, and then this all grows towards prime brokerage.

Your next question comes from the line of Cassie Chan with Wells Fargo.

I just wanted to ask, it seems like the number of clients continues to grow and picked up again this quarter. How if at all the profile of these clients have changed in terms of AUM? Or are they actually using multiple products in addition to custody right from the start now? Just curious if that's evolved as well.

Thanks, Cassie. Well, as I mentioned earlier, look, we have a lot of crossover between our services for our clients. That continues to do well for us, which probably measure it for the next reporting period, and we'll talk about it next time more. But it's all, I think, been positive. The profile of the client is changing in terms of we have this whole new addressable market, which is the traditional financial firms coming to Bitgo. So also have some announcements here that are not yet announced yet, but deals that are already signed and inked, which you will be hearing about, I think, in this quarter, which are exciting from firms that just a year ago would not have been listed in any type of crypto or digital asset-related products. So we are seeing that shift. I do think CLARITY remains the next -- I don't want to call it a hurdle, maybe the next graduation point where a number of maybe the more conservative firms will also be looking and solidifying their digital asset plans. But right now, it seems like everybody is growing, and you can see there's a heated race among the new entrants to try to be fastest and the best. So I think that is creating a bit of FOMO among those players that have not been in digital assets yet, and we are seeing all of those and all of those RFIs and all those RFPs.

Your final question comes from the line of Stephen Glagola with KBW.

Can you unpack more on some of the prepared remarks around how you guys are thinking about balancing the reinvestment in strategic growth initiatives around product, platform, regulatory capability that you called out while also driving operating leverage for sustained positive and growing EBITDA over time?

Yes. Great. So we've been through, I think, 3 or 4 kind of up and down cycles in Bitcoin over the years. And sometimes these down cycles are the best times to be building and especially AI is absolutely helping us on the build. So we don't see any need for like additional costs of any material type. Of course, we're always watching to see where are the cost of the business. We did have onetime expenses around the IPO itself and some legal costs that are associated with that. I think those were typical. And then for the most part, like we're building, I think there is a strong demand for this tokenized equities component and being first. One of the things we have is, I think, the broadest support of L1s and L2s of any major custodian, certainly much larger than Coinbase and Anchorage. And staying ahead there does require that we continue to build. So we will continue to build there. But of course, we're always watching the bottom line. We want to make sure that we are building a healthy business. I think that we're well within that -- those parameters right now. And then as the market exits its bear cycle, I think you're going to see real wins on all the economic measures that.

We have reached the end of the question-and-answer session. I will now turn the call back to Mike Belshe for closing remarks.

Thanks, everybody, for joining us today. So to close, I just want to come back to 3 points. First, underlying monetization has held up better than the gross revenue presentation would suggest. We are encouraged to see our team launching our derivatives trading products as we talked about, our overall higher overall margins and take rates across digital asset sales, taking and Stablecoin as a Service are great. Second and most importantly, we continue to strengthen the business itself. We launched new capabilities, expanded business lines. We added clients and partners. We advanced the stablecoin infrastructure and continued investing in the people and the platform that we believe will drive long-term benefits and growth. So that's the business we're building, and it's the lens through which we believe investors should evaluate our progress as well. Finally, Bitgo remains uniquely positioned as the institutional-grade digital asset infrastructure platform, secured regulated control layer for digital assets and all the new entrants see that capability. Our advantage is the combination of regulatory standing, security architecture and the breadth of capabilities that we provide within a single integrated platform. We're operating in a large and evolving market, and we continue to see encouraging demand across all areas of the business. Importantly, while reported asset values were impacted by lower digital asset prices during the quarter, the normalized assets on platform and normalized state balances continue to grow meaningfully, which we believe will drive upside in our model as the digital asset prices recover. So thank you, everybody.

This concludes today's call. Thank you for attending. You may now disconnect.