Crypto Bank Anchorage Digital Takes on Custody for ARK 21Shares Bitcoin ETF

As a seasoned analyst with extensive experience in the financial sector and a keen interest in the evolving crypto space, I find the recent partnership between Anchorage Digital and 21Shares intriguing. The fact that Anchorage Digital, the first U.S. federally chartered crypto bank, is now servicing one of the leading ETFs in the custody space previously dominated by Coinbase Inc., signals a significant shift in the industry landscape.

21Shares, a major issuer of cryptocurrency exchange-traded funds (ETFs), has announced that Anchorage Digital, the first and only U.S. federally chartered digital asset bank, will be responsible for safekeeping their assets. This information was shared in a statement released on Thursday.

Anchorage Digital Bank N.A. is thrilled to expand crypto availability as they have been chosen as the custodian for 21Shares’ U.S. spot ETF range,” said Nathan McCauley, the bank’s co-founder and CEO, in a statement. “Our federal charter, which eliminates state-by-state regulation and designates us as a suitable custodian, makes us an ideal pick for ETF custody diversification.

The creation of crypto ETFs was designed to provide a broader range of investors with simpler access to investment products tied to cryptocurrencies, which were previously harder to trade due to their complexity. However, managing custody – the safekeeping of vast amounts of assets supporting these products – is a significant task for external firms.

Up until now, Coinbase has stood out as a pioneer in custodial services for U.S. Exchange Traded Products (ETPs), which encompasses Exchange Traded Funds (ETFs) and other related financial instruments.

Anchorage Digital emphasized their legally imposed separation of funds as a bank supervised by the Office of the Comptroller of the Currency, offering a safeguard against potential bankruptcy risks experienced by collapsed crypto companies in recent times. Furthermore, they declared their utilization of cutting-edge security measures and innovative technology to secure assets, incorporating biometric authentication and offline storage of private keys.

Custody has become an increasingly thorny problem in the crypto sector. The U.S. Securities and Exchange Commission has pursued a proposed rule requiring registered investment advisers to keep clients’ crypto assets with so-called “qualified custodians.” If the narrow definition pushed by SEC Chair Gary Gensler prevails, only a short list of firms inside the industry may qualify, including Anchorage Digital as a bank and such registered broker dealers as Prometheum Inc. and tZero Group Inc. (as of its announcement this week).