Anchorage Digital Bank and BitGo Join Coinbase to Custody 21Shares Crypto ETFs
Expanding Custody for 21Shares Crypto ETFs
21Shares, a leading asset manager, has announced the addition of Anchorage Digital Bank and BitGo as custodians for its spot cryptocurrency exchange-traded funds (ETFs). This move adds diversification to the custody of Bitcoin (BTC) and Ether (ETH) for the company’s two U.S. spot crypto ETFs, ARK 21Shares Bitcoin ETF (ARKB) and 21Shares Core Ethereum ETF (CETH). Previously, Coinbase was the primary custodian for these assets.
Importance of Diversifying Crypto Custodians
Andres Valencia, head of investment management at 21Shares, emphasized the significance of having multiple custody partners. “We consider our custody partners to be crucial to the risk management of our product lineup, and diversification adds to the safety and security of our offering,” he stated. This step is seen as a strategy to minimize the risk associated with relying on a single custodian.
Nate Geraci, president of The ETF Store, echoed this sentiment. He noted that more issuers are likely to diversify their custodians to minimize the risk of a single point of failure.
Regulated Crypto Custodians in the US
The United States has seen an increase in regulated digital asset custodians. In August, Fireblocks received approval from New York’s financial regulator to custody assets for U.S. clients. Other major players, such as Coinbase Custody Trust, Fidelity Digital Asset Services, and PayPal Digital, are also licensed and adhere to strict standards for secure crypto storage. These standards include using cold-storage wallets and multiparty computation (MPC) for authorizing transactions, along with insurance against exploit risks.
SEC’s Stance on Crypto Custody
The U.S. Securities and Exchange Commission (SEC) has been vigilant in enforcing the custody rule, which sets guidelines for safeguarding investor funds. In September, the SEC charged fund adviser Galois Capital Management for failing to properly custody client assets, including holding investor funds with the now-defunct cryptocurrency exchange FTX.
Anchorage Digital Bank’s Role
Anchorage Digital Bank, a federally chartered bank, aims to provide fund issuers with the regulatory certainty and security profile needed to streamline access to crypto via a regulated ETF wrapper. Nathan McCauley, CEO of Anchorage Digital Bank, stated that their goal is to offer the necessary regulatory and security assurances to fund issuers.
Future Outlook for Crypto Custody
With the inclusion of Anchorage Digital Bank and BitGo alongside Coinbase, 21Shares sets a precedent for other U.S. spot crypto ETF issuers. This diversification in custodianship is likely to become a trend as more companies seek to mitigate risks and ensure the security of their digital assets.
Conclusion
The addition of Anchorage Digital Bank and BitGo as custodians for 21Shares’ crypto ETFs marks a significant step in diversifying and securing digital asset custody. As the regulatory landscape evolves, the importance of having multiple, regulated custodians will continue to grow, ensuring the safety and security of investor funds in the burgeoning crypto market.
