(Photo Illustration by Guillaume Payen/SOPA Images/LightRocket via Getty Images)
Anchorage, the qualified custodian company aiming at institutional investors, has announced it will be expanding its services to not only hold onto clients’ cryptocurrency, but also allow them to trade. Anchorage Trading is the new brokerage service from the Libra Association member that will allow institutional clients the chance to buy and sell crypto through the company’s expert traders.
This represents a big move for both Anchorage, and institutional cryptocurrency traders in general, as it opens up a lot more opportunities and options for this new, large money, to wade into the waters of this exciting and emerging market.
At the same time, Anchorage also announced the acquisition of Merkle Data, a provider of risk and data solutions for crypto institutions, that will benefit the trading desk at Anchorage with its deep knowledge of crypto markets, assessment of crypto liquidity, and asset pricing.
Institutional Crypto Brokerage Integrated with Custody
The decision to add this arm to its offering now makes Anchorage a much more enticing prospect for institutional clients. These clients would be looking to the company - who has a partnership with Visa - to securely, and under strict regulations, hold onto their crypto with its custody services, but they can now get the full service with brokerage trading.
I spoke with Nathan McCauley, co-founder and CEO of Anchorage, about what this move represents in the emerging institutional and enterprise space for cryptocurrency.
“Institutional investors have to transfer assets between their custodian and their broker for trading. Getting both services from a single trusted provider simplifies investors' workflows and reduces security risks,” he explained
“There's always been strong customer demand for us to enable trading, which is one of the many services our clients want from their custodian. Because crypto-assets are bearer assets, the custodian who holds the assets is best positioned to provide a range of additional services.
“Our clients choose Anchorage over alternatives not only because our custody solution is safer than cold storage, but also because of the range of additional services we offer.”
It is clear that the decision to offer trading while holding the assets is good for Anchorage, but as McCauley explains, it was the clients who drove this move from the custody company.
“This decision has been driven by client demand. Clients are asking for more and more from their custodian, and many clients choose their custodian specifically for the asset-specific services they're able to support. Clients who hold proof-of-stake assets want a custodian that enables them to capture returns from staking; clients who hold Maker want a custodian that enables them to vote on governance decisions. And clients of all types want a custodian that enables them to trade assets directly from custody,” he added.
“Our clients are forward-looking, and they see that crypto is becoming increasingly participatory. Choosing Anchorage is a way of future-proofing their stack, because they know we are building toward becoming an all-inclusive platform, supporting all assets and all forms of usability.”
Making crypto simpler
It may seem rather basic, but the manner in which cryptocurrency operates currently when trading is still rather complicated - especially for institutional investors who are not accustomed to the different investment procedure.
McCauley explains a simple consideration that many wouldn’t even think about:
“Many institutional clients still have to deal with the stress of manually copying and pasting alphanumeric strings to transfer tens or even hundreds of millions of dollars. Our solution lets them simply fund an account with USD, request a trade, and receive the resulting crypto deposited into their custody accounts.”
Of course, the offering from Anchorage is not only intended to make crypto more accessible to institutional clients who are new to the game, but it is also intended to offer a one-stop-shop for these interested funds, especially the larger ones.
“No matter the size of the fund, its investment thesis, or its use case, all institutional investors need the ability to buy, hold, and sell crypto. Funds that trade frequently will benefit from more seamless operations, since they no longer have to transfer assets between different providers,” the CEO added.
“Funds that simply buy and hold benefit because they don't need to go through vetting and set-up with brokerage venues that they'll only use a few times a year. That said, the clients who truly benefit the most are large institutional funds whose crypto portfolios are in the hundreds of millions—because they're the ones with the most at stake, for whom security concerns are the most acute.”
