March 27, 2024
Anchorage Digital Gears Up for Bitcoin ETF Boom After Helping Visa Buy an NFT
Bitcoin ETF

Anchorage Digital Gears Up for Bitcoin ETF Boom After Helping Visa Buy an NFT

An Unusual Role in the Crypto Boom

Anchorage Digital played an unusual role in the 2021 crypto boom: it helped Visa buy an NFT. Now, following the industry’s January launch of spot bitcoin ETFs, the San Francisco startup is gearing up for a bigger opportunity by helping institutions buy and manage crypto assets.

Bitcoin ETFs “A Big Unlock” for Crypto Custody

CEO and co-founder Nathan McCauley called the Securities and Exchange Commission’s Jan. 10 approval of bitcoin ETFs “a big unlock for the institutional ecosystem” for crypto custodial companies like Anchorage.

“The ease by which traditional investors are going to be able to get access to bitcoin through the ETF is a big game-changer,” he told Investor’s Business Daily. “We’re excited to see that progress.”

The Securities and Exchange Commission’s decision to approve 11 spot bitcoin ETFs loosed a new tier of institutional investors to begin buying digital assets. That immediately increased the demand for companies able to safeguard those institutional digital portfolios.

Crypto Custody: A Critical and Complex Concern

Crypto custody is a critical and complex concern. Crypto assets are essentially lines of code stored on blockchains, online distributed ledgers purportedly with no centralized authority. That makes these assets vulnerable to serious security breaches and fraud, which led to major scandals like the FTX meltdown in 2022.

The SEC sent a strong message that custody arrangements will be heavily scrutinised despite the approval of the Bitcoin ETFs. SEC Chair Gary Gensler underscored this point in a blog post, saying bitcoin ETF issuers “will be required to provide full, fair, and truthful disclosure about the products.” The approval of the bitcoin ETFs, he stressed, “does not endorse” the “arrangements” presented to would-be investors, “such as custody arrangements.”

Anchorage’s Self-Custody Service

In February, Anchorage introduced Porto, its first self-custody service for institutions. The offering enables institutions to buy, sell and manage their blockchain assets.

Anchorage competes with bigger players like Coinbase (COIN), as well as major financial institutions like Bank of New York Mellon (BK), State Street (STT) and JPMorgan Chase (JPM). However, the company stands out for its focus on custody from its inception in 2017, and from its founders’ experiences helping investors manage their crypto assets.

Regulatory Challenges and Crypto Skepticism

Despite its success, Anchorage faces regulatory challenges and lingering scepticism about crypto. The Office of the Comptroller of the Currency reprimanded the company in 2022 for violating money laundering monitoring rules, though Anchorage said it had taken corrective action.

Additionally, critics dismiss crypto as a speculative asset, and there are concerns about overregulation stifling the industry’s growth. McCauley acknowledges that for crypto to achieve greater success, it must offer more than just a speculative investment.

Image: Wallpapers.com

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