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Anchorage Digital sees asset custody demand surge amid crypto volatility

News
Anchorage Digital sees asset custody demand surge amid crypto volatility

Amid increased scrutiny and tumultuous events in the crypto industry, Anchorage Digital, the San Francisco-based cryptocurrency firm, reports a substantial 80% increase in the assets under its custody in the first quarter of 2023.

Anchorage Digital, the San Francisco-based cryptocurrency firm, reported a substantial upsurge in business, spurred by an increased desire for secure asset custody methods amidst crypto volatility and regulatory pressures, as revealed by the firm’s president.

The company witnessed an 80% surge in assets under its custody in the first quarter of 2023, a sharp rise from the previous quarter of 2022. As cited by the firm’s president, Diogo Monica, “billions of dollars of deposits” are channeled towards Anchorage, although exact figures have not been disclosed.

First digital bank

Anchorage Digital made headlines in 2021 by becoming the inaugural federally chartered crypto bank, gaining approval from the Office of the Comptroller of the Currency to serve as a custodian for other institutions interested in crypto offerings. This endorsement facilitated Anchorage’s ability to capitalize on the flight to safety triggered by crypto firm debacles such as FTX’s downfall last year, as elaborated by Monica.

The company is on the verge of finalizing a deal to provide custodial services to EDX Markets, a nascent crypto exchange backed by notable firms like Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp.

The mainstay of Anchorage Digital remains in providing custodial services to institutions, in conjunction with its foray into trading, lending, and decentralized finance tools, to cater to the growing influx of financial institutions into the crypto realm.

Shift from “retail domination to institutional accumulation”

Substantial transformation in the digital asset landscape, driven by the involvement of traditional financial firms, has sparked growth opportunities for the industry’s emerging custodians and tech providers. For instance, BlackRock Inc., the world’s most substantial asset manager, has applied for a US spot Bitcoin ETF, triggering a trend with applications from companies such as Fidelity, Invesco Ltd., and WisdomTree.

According to Monica, there’s a “major shift from retail domination to institutional accumulation,” suggesting a more considerable institutional stake in a smaller crypto “pie.” CoinShares, the digital asset manager and crypto research firm, reported in June that digital asset investment products witnessed the largest weekly inflows of $199 million in almost a year.

Despite announcing a staff reduction of 20% (equating to 75 personnel) to “refocus the business” in March, Anchorage’s president said there are no further job cuts in the pipeline. After raising $350 million in 2021 from investors, including the private equity firm KKR & Co., at a valuation exceeding $3 billion, the firm is not actively seeking more funding.

Finally, Anchorage is amplifying its footprint in Portugal, home to nearly 100 employees and the birthplace of Monica, who plans to relocate to Lisbon to better manage the firm’s international expansion and reacquaint himself with his heritage.