Anchorage Digital Bank, BitGo, and Coinbase Custody 21Shares Crypto ETFs
Diversification in Crypto ETF Custody
Anchorage Digital Bank and BitGo are now custodians for 21Shares’ spot cryptocurrency exchange-traded funds (ETFs), adding to Coinbase’s existing role. This move is significant for the diversification of spot crypto ETF custodians in the United States, where Coinbase has been the primary custodian for such products.
Custody for Bitcoin and Ethereum ETFs
Anchorage Digital Bank and BitGo will join Coinbase in the custody of 21Shares’ Bitcoin ETF (ARKB) and Ethereum ETF (CETH). According to Andres Valencia, head of investment management at 21Shares, adding more custodians is crucial for risk management and enhances the safety and security of their offerings.
Growing List of Qualified Custodians
21Shares is one of the first U.S. spot crypto ETF issuers to expand its custodian roster beyond Coinbase. Nate Geraci, president of The ETF Store, noted that diversifying custodians helps minimize the risk of single points of failure. Regulated digital asset custodians like Anchorage Digital Bank and BitGo are becoming more common in the U.S. These custodians adhere to strict standards for secure crypto storage, including cold-storage wallets and multiparty computation (MPC) for transaction authorization.
Regulatory Approvals and Standards
In August, Fireblocks, known for its self-custody treasury management products, received approval from New York’s financial regulator to custody assets for U.S. clients. Other institutional crypto companies like Coinbase Custody Trust, Fidelity Digital Asset Services, and PayPal Digital have also obtained similar licenses. These qualified custodians ensure secure crypto storage and generally offer insurance against exploit risks.
SEC Crackdown on Custody Rule Violations
The U.S. Securities and Exchange Commission (SEC) has been strict about the custody rule, which sets guidelines for safeguarding investor funds. In September, the SEC charged Galois Capital Management with 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 crypto fund issuers with the regulatory certainty and security profile they need. Nathan McCauley, CEO of Anchorage Digital Bank, stated that their objective is to streamline access to crypto through a regulated exchange-traded product (ETP) wrapper.
Conclusion
The addition of Anchorage Digital Bank and BitGo as custodians for 21Shares’ Bitcoin and Ethereum ETFs marks a significant step in diversifying crypto ETF custody. This move aims to enhance risk management, security, and regulatory compliance, providing greater safety for investors. As the landscape for digital asset custodians continues to evolve, the emphasis on regulatory adherence and diversification will likely become even more critical.
