Anchorage Digital Partners with 21Shares for Crypto ETF Custody
In a significant development in the cryptocurrency landscape, Anchorage Digital, the first and only U.S. federally chartered crypto bank, has announced its partnership with 21Shares to take on the custody role for several of its crypto exchange-traded funds (ETFs). This collaboration marks a pivotal moment for both entities, as they aim to broaden access to crypto investments for a wider range of investors.
According to a statement released on Thursday, this custody arrangement involves overseeing the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH). The ARK 21Shares Bitcoin ETF is already recognized as the third largest in terms of inflows, trailing only behind major players like BlackRock and Fidelity. This ranking is maintained by Farside Investors, highlighting the growing interest in such products.
Cathie Wood’s ARK Invest has partnered with 21Shares to offer the Bitcoin ETF, which has garnered significant attention from institutional and retail investors alike. Nathan McCauley, co-founder and CEO of Anchorage Digital Bank N.A., expressed enthusiasm about the partnership, stating, “Anchorage Digital Bank N.A. is pleased to further broaden access to crypto as a custodian selected for 21Shares’ U.S. spot ETF lineup.” He emphasized that their federal charter, which supersedes state-by-state regulation, positions Anchorage as a qualified custodian, making it a natural choice for ETF custody diversification.
The Role of Custody in Crypto ETFs
The establishment of crypto ETFs aims to provide investors with easier access to regulated products linked to cryptocurrencies, which have previously been challenging to trade. Custody services play a critical role in maintaining the safekeeping of billions in assets backing these products. To date, Coinbase has been a leader in custody services for the U.S.’s exchange-traded products (ETPs), which encompass a broader range of investment vehicles including ETFs.
Anchorage Digital distinguishes itself by emphasizing its legally required segregation of assets, operating as a bank regulated by the Office of the Comptroller of the Currency (OCC). This regulatory framework is designed to protect assets from the bankruptcy risks that have plagued several crypto firms in recent years. By leveraging “industry-leading security and novel technology,” Anchorage aims to safeguard these assets using advanced measures such as biometric authentication and offline private-key storage.
The Growing Importance of Qualified Custodians
The issue of custody has become increasingly complex in the crypto market, particularly in light of regulatory scrutiny. The U.S. Securities and Exchange Commission (SEC) is actively pursuing a proposed rule that would require registered investment advisers to store clients’ crypto assets with designated “qualified custodians.” If SEC Chair Gary Gensler’s narrow definition prevails, only a select group of firms within the industry may qualify. This list includes Anchorage Digital as a bank and registered broker-dealers such as Prometheum Inc. and tZero Group Inc., both of which have made recent announcements regarding their status.
This regulatory landscape underscores the necessity for robust custody solutions in the crypto space. As the market matures and more investors seek exposure to digital assets, having reputable custodians will be essential in instilling confidence and ensuring compliance with regulatory requirements.
Conclusion
The partnership between Anchorage Digital and 21Shares represents a significant step forward in the evolution of crypto ETFs and custody solutions. As the demand for cryptocurrency investment products continues to rise, collaborations like this will be crucial in providing the necessary infrastructure and regulatory compliance to support a growing investor base. The future of crypto custody will likely hinge on the ability of firms to adapt to regulatory changes while ensuring the safety and security of digital assets.
