Ben Strack

Anchorage Digital has linked up with crypto SMA platform Eaglebrook Advisors to allow wealth managers easier access to an investment vehicle some expect to take off.&nbsp;



Financial advisers use the Eaglebrook platform to allocate to various crypto strategies. Now, this partnership gives those professionals regulated access to crypto via Anchorage — a bank chartered by the Office of the Comptroller of the Currency (OCC).



Anchorage meets the US Securities and Exchange Commission’s definition of a “qualified custodian,” the companies said Wednesday — a term floated in a February <a href="https://www.sec.gov/news/press-release/2023-30">proposal</a> by the regulator that would “entrust safekeeping of client assets” to such entities.&nbsp;



“After the recent <a href="https://blockworks.co/tag/sec">SEC</a> custody proposal, it is more important than ever for [registered investment advisers] to safeguard digital assets with a qualified custodian,” Anchorage Digital CEO Nathan McCauley said in a statement.



Eaglebrook is no stranger to partnerships.&nbsp;



Fund giant Franklin Templeton made a strategic investment in Eaglebrook in April 2022 before <a href="https://blockworks.co/news/franklin-templeton-preps-first-institutional-crypto-accounts">launching its first crypto SMAs</a> — available to advisers and wealth managers via Eaglebrook’s platform — that September. <a href="https://blockworks.co/news/ark-invest-jumps-into-crypto-sma-arena">Ark Invest then joined forces with Eaglebrook</a> in October 2022 for the debut of its crypto SMAs.



The latest partnership comes as various crypto and traditional finance firms are exploring the introduction of spot crypto ETFs as an alternative to separately managed accounts (SMAs).



Unlike such ETFs though, crypto SMAs offer exposure to a range of assets that clients can own directly. Certain accounts may also allow investors to engage in tax-loss harvesting.



Though crypto SMAs have come to the US market in the absence of these ETFs, some believe a bitcoin ETF would boost SMA demand.



Read more: <a href="https://blockworks.co/news/crypto-smas-hyperdrive">Eaglebrook CEO: Bitcoin ETF would send crypto SMAs ‘into hyperdrive’</a>



Asset managers on Eaglebrook’s platform — including Franklin Templeton and Ark, <a href="https://blockworks.co/news/crypto-smas-in-mutual-funds-out">as well as Bitwise</a> and Global X, and ARK Invest — will be able to launch their SMA strategies on Anchorage Digital.



Those four firms are among the companies with spot bitcoin ETF proposals currently in front of the SEC. An August <a href="https://blockworks.co/news/judges-grayscale-sec-ruling">court win by Grayscale Investments</a> over the regulator <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">made such an approval more likely</a>, some segment observers believe. &nbsp;



The SEC is <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf">slated to rule on the proposed Ark 21Shares Bitcoin ETF</a> by Jan. 10.



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Anchorage and Eaglebrook link up in bid to boost crypto SMA access

Michael Bodley

Crypto custodian Anchorage Digital is allowing its customers to participate in crypto governance.



The move gives access to off-chain voting platform Snapshot via Anchorage Digital’s custody solution, which will now support more than 60 ERC-20 tokens, the company told Blockworks exclusively.&nbsp;



In an interview, <a href="https://blockworks.co/tag/anchorage-digital">Anchorage Digital</a> President Diogo Mónica told Blockworks that the idea behind the firm’s new product is to key in on the “proliferation of all of these different protocols” that are emerging alongside “all of these different tokens.”&nbsp;



Many prominent protocols make use of Snapshot’s off-chain governance platform, including <a href="https://snapshot.org/#/aave.eth/proposal/0xc17bc863a09c72152c1ac25d09fcee4748b58eb2e10e70886e20e77ad4d8fad0">Aave</a>, <a href="https://snapshot.org/#/lido-snapshot.eth/proposal/0xc017c451cd1ec85bf259d1f866844da296bb0f3209fd58297ccf07f7e91fa690">Lido</a> and <a href="https://snapshot.org/#/bitdao.eth/proposal/0xc5764508ad0a29ed646316197686f661bee472fd5ab0517938bf039a3e82f53e">BitDAO</a>. The custodian in a statement highlighted three accompanying use cases for its crypto governance platform.&nbsp;



<h2 class="wp-block-heading">Laying token governance groundwork</h2>



Initiatives to harness token holders across crypto companies have been met with mixed results.



Harnessing decentralized digital asset owners, including <a href="https://blockworks.co/tag/daos">DAO</a> participants, is a tall talk that has historically relied on online word of mouth efforts, including momentum pushes on Discord and Twitter, in addition to debates on the governance forums of protocols themselves.&nbsp;



Anchorage Digital’s aim in cutting through the online noise, Mónica said, is to develop an in-house crypto ecosystem of governance tokens that can avoid the pitfalls of setting up one-off solutions that must interact with individual protocols.



“Unfortunately, in the early beginnings of the DeFi summer, back three years ago or so, all of these [protocols] essentially reinvented the wheel, at least in theory,” Mónica said. “They all built their different protocol standards for governance, making them non-interoperable. This was previously a nightmare for folks like ourselves.”



Anchorage Digital, one of the largest crypto custodians that maintains a regulated US presence, previously handled client governance needs on something of a one-off basis that varied by the protocol in question, according to Mónica.



The company in its statement said it plans to “enable support for all applicable future ERC-20 tokens by default.” Anchorage Digital is the parent company of Anchorage Digital Bank, which bills itself as the digital asset native US federally chartered bank.



Like a number of crypto companies over the last 12 months, Anchorage Digital laid off staffers earlier this year, as previously reported by Blockworks. The banking unit was not affected, a spokesperson told Blockworks at the time.&nbsp;



Read more: <a href="https://blockworks.co/news/anchorage-digital-layoffs-nft">Anchorage Digital Layoffs Follow Bear Market, NFT Trends</a>&nbsp;



In enabling access to the governance platform, Anchorage Digital cited external research finding that in April 2023, there were more than 5,500 “unique proposals written” throughout the Ethereum ecosystem, including EVM-compatible chains — including upwards of 600 governance proposals with “more than 100 distinct votes.”



The company said that the latter signaled “a very active community” across the ecosystem.&nbsp;



<h2 class="wp-block-heading">How Snapshot via Anchorage works</h2>



Governance votes on Snapshot facilitated by Anchorage on behalf of the company’s institutional and retail client base don’t impose gas fees, because they’re conducted off-chain.&nbsp;



It’s somewhat of a similar setup to proxy voting outfits pushing for votes on Wall Street equities — albeit with substantial crypto-native shifts, according to Mónica. Client assets are not shifted from Anchorage’s custodial oversight as a result of participation in protocol governance.&nbsp;



“At a high level, this can be compared to traditional equity governance…however, it’s significantly different in reality, because the types of things that you’re voting on, that you’re deciding, are a lot more tactical when you’re an equity holder in [a] company,” Mónica said. “In the traditional crypto world, you have many votes per week. That is fundamentally different.”



Snapshot votes are not automatically executable — they are more akin to a straw poll. These signaling votes can be executed by developers of a protocol who maintain control of upgradeable components, typically through a multi-signature wallet with varying degrees of decentralization.



Truly decentralized protocols employ on-chain voting to explicitly authorize changes to blockchain code, which, when approved, are automatically executed, usually after a time lock delay period. <a href="https://blog.tally.xyz/understanding-governor-bravo-69b06f1875da">Governor</a>, developed <a href="https://docs.compound.finance/v2/governance/">by Compound Finance</a>, is an oft-used example.



But snapshot has gained popularity thanks to its gasless voting feature which makes it a viable option for a much wider range of token holders.



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Anchorage Digital Enables Snapshot Voting for Custody Customers

Jon Rice

Anchorage Digital is the latest in a long list of cryptocurrency companies to announce strategic layoffs during the extended crypto winter, which is now approaching 18 months long.



The company has parted ways with around 20% of its staff, some 75 people, as the bear market wears on. The layoffs are part of a realignment within the company that has taken several months to complete, and unrelated to recent news banking events, a spokesperson told Blockworks.&nbsp;



The company also cited regulatory uncertainty as a key driver for the refocus.



Anchorage Digital offers institutional clients a range of services, including qualified custody for crypto assets. Among those assets: Non-fungible tokens (NFTs), which have not proven to generate strong demand by the kind of institutional clients the company serves.



A spokesperson told Blockworks that “Our business has seen low institutional demand for certain classes of digital assets, and as a result, Anchorage Digital will reduce focus on them. This includes general demand for NFTs, which means that after a recent NFT feature release we will reduce investment in future institutional functionality.”



Despite lethargic institutional adoption, NFT trading volumes among retail investors have remained relatively strong according to data from DappRadar, with over $2 billion in trading in February 2023.



However, even the biggest players in the industry are <a href="https://blockworks.co/news/meta-winding-down-nfts">reconsidering their approach to the NFT market</a>, including Meta.



Anchorage Digital is also considering a first: Decommissioning custodial support for other low-utilization assets, including Litecoin, as the company “fuels the parts of our business that are most essential to our clients in the current and anticipated marketplace.”



<h2 class="wp-block-heading">Anchorage Digital Bank unaffected</h2>



Anchorage Digital Bank, a subsidiary of Anchorage Digital and the first federally-chartered digital asset-focused bank, is not affected by the layoffs. The spokesperson noted that it remains fully-reserved, does not engage in fractional reserve banking, and that no customer assets have been at risk following the fall of crypto-focused depository institutions Silvergate and Signature Bank.



“Our assets under custody are at an all-time-high, and the demand for regulated crypto banking is only expected to grow further in light of recent proposed regulation by the SEC,” said a spokesperson for Anchorage Digital Bank.



<a href="https://blockworks.co/news/anchorage-hires-new-execs">Anchorage Digital Bank itself went on a small hiring spree</a> earlier this year, adding several executives to its staff in January.



Anchorage Digital joins a host of other major cryptocurrency and tech companies in reducing headcount during the extended market downturn. <a href="https://blockworks.co/news/coinbase-lays-off-950-staff-cuts-operational-costs-by-25">Coinbase</a>, <a href="https://blockworks.co/news/kraken-layoffs-30-percent">Kraken</a>, <a href="https://blockworks.co/news/opensea-lays-off-20-of-staff">OpenSea</a> and <a href="https://blockworks.co/news/polygon-immutable-staff-layoffs">Polygon</a> have all laid off staff over the last few months, while major tech companies in the U.S. have reacted to the downturn in macroeconomic conditions by laying off an estimated 100,000 staffers.



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Anchorage Digital Layoffs Follow Bear Market, NFT Trends

Anchorage Digital Bank has added and promoted a slew of C-suite executives focused on security and compliance, citing the crypto industry’s “flight to quality” following events such as the crash of FTX.



Mark duBose, now chief compliance and risk officer, held similar roles at open source technology project Centre and, prior to that, Circle. He was also a chief operational risk officer at Santander Bank and held various leadership roles at Bank of America.



Rachel Anderika, who was formerly the bank’s chief risk officer, is set to become chief operating officer as a result of the hire.



These moves are pending “supervisory non-objection” from the Office of the Comptroller of the Currency (OCC), Anderika told Blockworks. Anchorage Digital received its OCC charter in January 2021.&nbsp;



Meanwhile Frieder Weichelt, former chief risk officer at institutional crypto platform BitGo, has been named chief information security officer. 



Founded in 2017, the San Francisco-based federally chartered bank raised $350 million at a roughly $3 billion valuation in December 2021. Investors include Andreessen Horowitz, Goldman Sachs, KKR, Visa and Singapore sovereign wealth fund GIC.&nbsp;&nbsp;



The hires come several months after the company <a href="https://blockworks.co/news/anchorage-digitals-new-engineering-head-focused-on-scaling-team-security">hired a new head of engineering</a> focused on scaling the team, as it sought to target <a href="https://blockworks.co/anchorage-co-founder-institutions-becoming-more-sophisticated-about-crypto">“more sophisticated”</a> institutions looking for secure crypto infrastructure.



<h2 class="wp-block-heading">Anchorage Digital&#8217;s new Bank Secrecy Act officer is a US agency vet</h2>



Dustin Palmer, a former senior advisor to general counsel at the US Department of Treasury also joins as interim Bank Secrecy Act (BSA) Officer. 



Though not a new role, it is unclear who Palmer is replacing. A spokesperson declined to comment.&nbsp;



Prior to his time at the Department of the Treasury from 2008 to 2011, Palmer was an attorney at the US Department of Homeland Security, according to his LinkedIn page. More recently, he spent nearly 10 years as head of Promontory Financial Group’s financial crimes compliance practice, as well as a managing director at Berkeley Research Group — a role in which he will remain.&nbsp;



Scott Schwartz, Anchorage Digital’s Office of Foreign Assets Control (OFAC) officer, will now also work as deputy BSA officer.&nbsp;



The <a href="https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html" target="_blank" rel="noreferrer noopener">Bank Secrecy Act</a> (BSA), passed in 1970, established program, recordkeeping and reporting requirements for national banks, federal savings associations, federal branches and agencies of foreign banks, particularly around combating money laundering.&nbsp;



Crypto exchanges fall under the scope of the BSA, too. Reuters <a href="https://www.reuters.com/technology/exclusive-us-sought-records-binance-ceo-crypto-money-laundering-probe-2022-09-01/?rpc=401&amp;" target="_blank" rel="noreferrer noopener">reported</a> in September that US authorities were investigating whether Binance violated the act.



​​”As has been well documented, regulators across the globe are reaching out to every major crypto exchange to better understand our industry,” a Binance spokesperson told Blockworks at the time. “We work with agencies regularly to address any outstanding questions.”



Arthur Hayes and Ben Delo, co-founders of crypto derivatives exchange BitMEX, <a href="https://blockworks.co/bitmex-founders-hayes-delo-plead-guilty-to-violating-us-bank-secrecy-act">pleaded guilty</a> to violating the Bank Secrecy Act last February. They were ordered to pay $10 million each for their involvement in “willfully failing” to implement and maintain anti-money laundering measures at the company.



“Recent market events have reaffirmed what we have long believed — that security and regulation are key to increasing trust in the crypto economy,” Anchorage Digital CEO Nathan McCauley said in a Tuesday statement.  



<h2 class="wp-block-heading">Other recruits well-versed in legacy finance</h2>



The company has added others with deep traditional finance backgrounds amid its compliance push.  



Mo Abdoolraman, now interim head of know your customer (KYC), has held vice president roles in compliance at Goldman Sachs and Citi. He was also formerly a senior manager of financial crime and identity at fintech company Chime. 



Daniel Sankey is set to lead the company&#8217;s financial intelligence unit. The team completes transaction monitoring and escalates any necessary investigations to the bank’s BSA officer.



Sankey was previously head of financial crimes compliance at financial services firm Brex. He has also worked in BSA compliance, reporting and crimes investigations roles at Coinbase, Square and Wells Fargo.&nbsp;



As part of the crypto bank leadership reshuffling, Jessica Perkins, who oversees third-party risk management, will now hold the title of enterprise risk management lead.



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Bank Secrecy Act Officer Amid Anchorage Digital’s Latest Hires

<div id="highlights-block_6343fda5130bf" class="highlights">
 <ul>
 <li>Anchorage’s new executive was most recently the chief technology officer at tech company Clear</li>
 <li>Allowing institutions to keep assets away from potential attackers while still participating in on-chain activities is critical, Jouhal says</li>
 </ul>
 
</div>



Anchorage Digital hired a new head of engineering who is focused on scaling the team, as the crypto platform seeks to target <a href="https://cms.blockworks.co/anchorage-co-founder-institutions-becoming-more-sophisticated-about-crypto/" target="_blank" rel="noreferrer noopener">“more sophisticated”</a> institutions looking for secure crypto infrastructure.



CJ Jouhal was most recently chief technology officer at tech company Clear, where he led the engineering team as it went public in June 2021. Jouhal has also worked in senior leadership positions at other tech companies, including Zocdoc, Audible, and eBay.&nbsp;



Anchorage, which sought to triple the size of its engineering team this year, has so far doubled the unit’s headcount in 2022, a company spokesperson told Blockworks.



The company, founded in 2017, focuses on custodying digital assets. It seeks to support new cryptocurrencies and continue building client partnerships using its application programming interfaces (APIs).



Keep reading for excerpts from Blockworks’ interview with Jouhal.&nbsp;



Blockworks: Why did you choose to jump into crypto from Clear?



Jouhal: My time at Clear was centered around scaling the technology stack and enhancing the platforms to safely and securely use biometrics.



While there are differences between Anchorage and Clear, I see parallels between the two. Anchorage is also focused on unlocking new efficiencies by bridging the world of Wall Street and crypto. Anchorage is leading the way for safe and secure institutional participation in the crypto economy.



So being able to dive into a world where I can make a tremendous impact at bridging those two worlds was an opportunity I couldn’t pass up, to be honest.



I am new to the crypto industry. I have been diving into books and learning. A challenge on its own is becoming a domain expert, which I want to do very, very quickly.



Blockworks: What will you be most focused on in your new role?



Jouhal: My top priority is going to be to carefully scale the engineering organization by attracting and retaining the top talent. Anchorage set a goal of hiring 100 people in one year, and we’re on track to meet that goal…so for me, it’s important to continue on that path.



When you grow at this scale, it’s key to make sure that as everyone’s onboarding and joining, they can become efficient and impactful immediately without feeling isolated, especially in this world of hybrid [working].



Blockworks: What type of talent are you looking for?



Jouhal: When I look at who we’re targeting, the skill sets definitely vary; we have back-end engineers [and] front-end engineers.



We’re definitely going with a very broad brush with who we’re targeting, and we’re seeing a lot of inbounds too, which shows the interest still lies in the technology world of entering the crypto space. It’s not necessarily industry-focused when we’re looking at talent.



Blockworks: What other priorities do you have in the new position?



Jouhal: What really makes us different is taking a security-first approach to proving custody and making sure it’s done in a very scalable manner as well. That to me drives a lot of what we’re building for institutions to adopt, because this is a hard problem.



We’re working with every type of institutional partner…We want to build [our product] so it’s not just secure, but it scales to what the financial institutions need and want. If you keep your assets offline in cold storage, it restricts your ability to participate on-chain, and our goal is to bridge that gap so that you can safely and securely keep your assets out of potential attackers while still participating in on-chain activities.



Blockworks: What do you make of some of the <a href="https://cms.blockworks.co/tag/hacks" target="_blank" rel="noreferrer noopener">crypto hacks</a> this year?



Jouhal: &nbsp;Hacks are a top-of-mind concern for the industry. That’s precisely why Anchorage has a robust review process for new assets. If a security issue comes up for a new protocol, Anchorage is there to help as a trusted, time-tested, and regulated partner.



Blockworks: What are you keeping your eye on in the coming months?



Jouhal: We are a regulated digital asset platform, and from that perspective we are leading in the industry of ensuring that regulations are adhered to and helping define some of those regulations too. I am closely watching that to understand how the government moves forward with some of the plans…and hopefully quickly.



The second thing is that continuing to bridge the gap between digital assets and what would be traditional fintech and traditional financial services in a manner where we can have an impact across multiple industries is important for me.



Understanding the crypto and blockchain space and seeing how we can leverage our offering to break into more industries and continue to bridge the gap between what traditional technology does — even something such as mortgages, real estate or deeds.



This interview has been edited for clarity and brevity.



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Anchorage Digital’s New Engineering Head Focused on Scaling Team, Security

Sebastian Sinclair

<div id="highlights-block_62c6232f8b8e8" class="highlights">
 <ul>
 <li>The crypto lending market has been shaken by poor risk management and recent bankruptcy filings</li>
 <li>Anchorage Digital said it has steered its ship by opting into a regulated regime early and by offering lower than market average lines of credit</li>
 </ul>
 
</div>



Amid bankruptcy filings and sector-related layoffs, crypto lenders have been dealt a substantial blow.



<a href="https://cms.blockworks.co/voyager-files-for-bankruptcy-days-after-freezing-withdrawals/" target="_blank" rel="noreferrer noopener">Voyager Digital</a> became the latest major crypto lender caught up in the downfall of Singapore-based hedge fund firm Three Arrows Capital (3AC) on Wednesday. The lender has filed for Chapter 11 bankruptcy in the Southern District of New York.



Less than a week prior, 3AC filed for <a href="https://cms.blockworks.co/3ac-files-for-bankruptcy-as-co-founders-location-unknown/" target="_blank" rel="noreferrer noopener">Chapter 15 bankruptcy</a>, four days after being <a href="https://cms.blockworks.co/three-arrows-capital-ordered-into-liquidation-by-bvi-court-report/" target="_blank" rel="noreferrer noopener">ordered into liquidation</a> by a British Virgin Islands court. The location of 3AC&#8217;s co-founders Kyle Davies and Zhu Su remains unknown.



Questions over the legitimacy of and the need for increased <a href="https://www.afr.com/technology/depression-like-crashes-inevitable-without-crypto-controls-expert-20220703-p5ayps" target="_blank" rel="noreferrer noopener">regulation</a> have begun to find a footing following the industry&#8217;s upheaval in recent weeks.



Many of the sector&#8217;s larger lenders, including <a href="https://cms.blockworks.co/celsius-withdrawal-halt-reveals-run-risks-on-other-crypto-banks/" target="_blank" rel="noreferrer noopener">Celsius</a>, <a href="https://cms.blockworks.co/babel-finance-working-to-ease-unusual-liquidity-pressures/" target="_blank" rel="noreferrer noopener">Babel Finance</a> and <a href="https://cms.blockworks.co/vauld-stops-withdrawals-eyes-restructure-after-users-pull-nearly-200m/" target="_blank" rel="noreferrer noopener">Vauld</a>, have paused withdrawals as a result of extreme market conditions and a liquidity crunch impacting other sectors in the industry, including <a href="https://cms.blockworks.co/coinflex-plans-to-raise-missing-funds-with-new-token/" target="_blank" rel="noreferrer noopener">exchange providers</a>.



As a result of the ongoing turmoil, crypto prices — reflected predominantly in the bellwether asset bitcoin — have sunk from their November all-time highs. Bitcoin was last seen changing hands for around $20,400, up slightly on the day, but down more than 70% from its November high of $69,000. 



Bitcoin&#8217;s leg down from around $36,000 — seen at the time of Terra&#8217;s UST stablecoin collapse on May 7 — demonstrates that, at the time, confidence was already waning. Bitcoin has since tanked a further 30% from $30,000 witnessed on June 8 — days before Celsius halted withdrawals — to current levels.



&#8220;The issues of large players such as Celsius and 3AC have triggered massive withdrawals of client funds from&nbsp;several crypto platforms offering lending, borrowing and trading services,&#8221; Milosz Papst, director of UK-based investment research firm Edison Group, told Blockworks in an email.



He said many of the industry&#8217;s platforms have suffered even though only a few of the industry&#8217;s firms were found to have been exposed to 3AC and Celsius.



On Wednesday, Digital Currency Group (DCG)-backed crypto brokerage firm Genesis <a href="https://cms.blockworks.co/genesis-reveals-exposure-to-bankrupt-three-arrows-capital/" target="_blank" rel="noreferrer noopener">confirmed it too had been exposed</a> to 3AC for an undisclosed loan amount with&nbsp;a weighted average margin requirement of over 80%.



DCG has assumed certain liabilities of Genesis related to 3AC to ensure Genesis has the capital on hand to operate and scale its business for the long term, CEO Michael Moro said in a <a href="https://twitter.com/michaelmoro/status/1544733042849320960?s=20&amp;t=bLrqNDjrD2U1kVrKjtOTug" target="_blank" rel="noreferrer noopener">tweet</a> Wednesday.



<h3 class="wp-block-heading">Navigating risk</h3>



Some, like institutional lending firm Anchorage Digital, remain steadfast. &#8220;Buoyed&#8221; by what it views as significant risk management and appropriate counterparty credit analysis, Anchorage said it has continued to steer its ship safely along rocky shores by ensuring it knows exactly which borrower counterparties it onboards.



&#8220;From our point of view, our risk management was properly attuned to the inherent risk in the market,&#8221; Nathan McCauley, co-founder and CEO of Anchorage, told Blockworks in an interview Wednesday. &#8220;Once we have borrowers on board, we are constantly assessing their credit.&#8221;



He said his company regularly asks those borrowers to provide quarterly statements or other ongoing updates on their financial health. 



Founded in 2017, Anchorage Digital is a regulated crypto platform providing institutions with integrated financial services and infrastructure. The platform also offers custody solutions to large clients.



The lender is home to the world&#8217;s first federally-chartered digital asset&nbsp;bank and boasts the likes of Paradigm&#8217;s chief legal officer, Katie Biber, and Andreessen Horowitz general partner Chris Dixon as board members.



3AC, meanwhile, <a href="https://cms.blockworks.co/newsletter/daily/?id=28278879" target="_blank" rel="noreferrer noopener">reportedly borrowed</a> from Voyager at a rate of 12% on an uncollateralized basis before depositing in Terra&#8217;s lending and borrowing protocol, Anchor, at a rate of 19%. After Terra&#8217;s collapse some, including 3AC, were caught with their pants down as the price of LUNA — the native Terra token attempting to backstop its stablecoin UST from depegging — fell sharply. 



&#8220;Generally speaking, if you&#8217;re going to be doing under or uncollateralized lending&#8230;you have to have very good counterparty credit analysis,&#8221; McCauley said when asked about the current state of affairs for the crypto lending market. &#8220;It is possible to do that safely.&#8221;



<blockquote class="wp-block-quote">&#8220;Your risk management systems have to be extremely good. And even in that case, you&#8217;re still subject to surprising market events that might take place.&#8221;</blockquote>



Before filing for bankruptcy, Voyager issued 3AC a default notice on $650 million in unsecured loans. Blockworks has repeatedly reached out to 3AC but has not yet received a response.



&#8220;There was a lot of things going on in the markets that have turned out to have been unsafe,&#8221; McCauley said. &#8220;When we looked at building our book, we wanted to build a lending book with realistic APYs that allowed our lender clients to preserve capital and not lose their principal because we were getting them into difficult or potentially unsafe loans.&#8221;



When asked, Anchorage declined to publicly disclose how much it offered in yearly percentage yield terms, though the firm said it does offer institutional clients up to 5.15% annual percentage returns on bitcoin loans, up to 3.97% on ether and 9.58% on USDC.



<h3 class="wp-block-heading">Can lenders stay afloat?</h3>



Amid the liquidity crisis and bankruptcy filings, Anchorage said last month in a <a href="https://medium.com/anchorage/the-path-forward-for-crypto-lending-a73134fa5a28" target="_blank" rel="noreferrer noopener">blog post</a>, while it wasn&#8217;t the first to the lending market and didn&#8217;t offer the largest lines of credit, it was because of its &#8220;measure twice, cut once&#8221; approach that the firm has managed to keep its head above water.



Anchorage said it does not deploy capital in decentralized finance nor use its capital to fund investment “strategies,” when compared to other competitors in the market.



&#8220;Despite the fact that the market went through extreme volatility and a lot of people were found to not be doing risk management appropriately, we had a very large book and managed it flawlessly throughout,&#8221; McCauley said. 



<blockquote class="wp-block-quote">&#8220;We&#8217;re pretty confident that we can go through similarly situated cycles.&#8221;</blockquote>



The co-founder added while additional regulation may help shield retail investors from current market woes, it is already possible for lenders to opt into being regulated in their lending programs.



Celsius is not registered with the Securities and Exchange Commission and neither is Anchorage, though the Anchorage Digital Bank National Association is chartered by the US Office of the Comptroller of the Currency.



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Crypto Lenders in Turmoil as Markets Reel From ‘Unsafe’ Risk Management

<div id="highlights-block_621f50cb2906a" class="highlights">
 <ul>
 <li>More institutions are asking about emerging digital asset areas to invest in, including NFTs, according to Anchorage Digital co-founder Diogo Mónica</li>
 <li>Anchorage will be investing heavily in its financing business this year and looks to support more cryptoassets</li>
 </ul>
 
</div>



Institutions are increasingly asking about emerging cryptoassets and segments of the space that could warrant an investment, as well as NFTs, according to Anchorage Digital’s co-founder.



<a href="https://cms.blockworks.co/?s=anchorage" target="_blank" rel="noreferrer noopener">Anchorage</a> is a federally chartered cryptocurrency bank based in San Francisco and is regulated by the Office of the Comptroller of the Currency. It offers custody, trading, staking, governance and financing services.



The company’s hundreds of clients include sovereign wealth funds, government institutions, crypto funds, miners, banks, asset managers and corporations.



About 90% of the conversations Anchorage had with institutional investors three years ago involved explaining what crypto is, pointing out that the space goes beyond bitcoin and sharing the potential benefits of investing in it, according to Diogo Mónica, Anchorage’s president and co-founder. But those types of discussions make up about 30% of talks today, he noted.



“There is still the conversation about crypto and some skepticism, but it’s absolutely the minority at this point,” Mónica said about institutions.



<blockquote class="wp-block-quote">“They’re a lot more sophisticated, they’re coming to us with concrete plans, and they’re coming to us knowing a lot more about the network.”</blockquote>



Institutions are commonly asking about allocating to assets aside from bitcoin and ether, and they&#8217;re curious about other potential areas of investment in the space, he told Blockworks. Some have also asked about purchasing and custodying NFTs.



<h3 class="wp-block-heading">Anchorage joins AIMA</h3>



Anchorage became a member of the Alternative Investment Management Association (AIMA), the company announced Tuesday. It will contribute to AIMA’s first Digital Asset Custody Report, which is set to be published later this month.



Anchorage joins 2,100 other AIMA members across more than 60 countries. The members advise and educate decision-makers in the alternative investment space.



“Having crypto represented on AIMA is extremely important as there’s maturity in the space,” Mónica said. “It’s another very clear step forward in this narrative of institutions coming, but it’s clear from announcements like this that institutions are already here.”



<a href="https://www.aima.org/article/press-release-pwc-elwood-and-aima-publish-third-annual-global-crypto-hedge-fund-report.html'" target="_blank" rel="noreferrer noopener">An AIMA study</a> last year found that 47% of traditional hedge funds, representing $180 billion of assets under management, were already invested or looking at investing in crypto.



“Anchorage represents some of the world’s largest and most renowned institutional clients, making them a natural fit for AIMA,” AIMA CEO Jack Inglis said in a statement.



<h3 class="wp-block-heading">Focuses for 2022</h3>



Mónica said Anchorage will be investing heavily in its financing business this year and will look to expand into Asia.&nbsp;



Anchorage Financing allows clients to use digital assets as collateral for crypto loans or lines of credit in dollars. Institutions lending the crypto can earn yields between 7% and 9%, the Anchorage co-founder said.&nbsp;



The crypto bank is also looking to support more assets, such as Cosmos- and Solana-based assets.  



“People thought four years ago that the [crypto] world was going to be one asset or a couple of assets,” he said. “Now we’re seeing there are many dozens of legitimate assets with legitimate different types of utility.”



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Anchorage Co-founder: Institutions Becoming ‘More Sophisticated’ About Crypto

Jacquelyn Melinek

<div id="highlights-block_61b918abc45c1" class="highlights">
 <ul>
 <li>KKR is also investing in Anchorage’s Next Generation Technology Growth Fund II, which will be its first direct equity investment in a digital asset company</li>
 <li>This raise is another indication that KKR is interested in diversifying its portfolio into digital assets, after it invested as a limited partner in ParaFi Capital’s flagship fund in September</li>
 </ul>
 
</div>



Anchorage Digital raised $350 million in a Series D funding round led by private equity firm KKR, according to an announcement on Wednesday.&nbsp;



To date, the company has raised $487 million, Diogo Mónica, president and co-founder of Anchorage, said to Blockworks in an interview.



Other investors in the round include <a href="https://cms.blockworks.co/goldman-sachs-defi-has-its-advantages-over-traditional-finance/" target="_blank" rel="noreferrer noopener">Goldman Sachs</a>, Alameda Research, Andreessen Horowitz (<a href="https://cms.blockworks.co/a16z-launches-400m-seed-fund-to-expand-into-new-technology/" target="_blank" rel="noreferrer noopener">a16z</a>), as well as funds and accounts managed by Blockchain Capital, GIC, GoldenTree Asset Management, Innovius Capital, Kraken, Lux Capital and others.



&#8220;It speaks volumes to the legitimacy of crypto and how far we’ve come as an industry,” Mónica said. “KKR is one of the top financial investment firms and they believe in what we do. Goldman is one of the largest investment banks in the world. Crypto is exciting to Wall Street, and the names attached to this round speak to that trust,” he added.&nbsp;



In mid-November, KKR was set to lead the investment round that would value the bank at $3 billion, but the amount raised was not disclosed at the time, Blockworks <a href="https://cms.blockworks.co/anchorage-series-d-raise-at-3b-valuation/" target="_blank" rel="noreferrer noopener">previously reported</a>.



The company confirmed that this capital raise values the company at over $3 billion but declined to share what the valuation was prior to the announcement.&nbsp;&nbsp;



“We see this [capital raise] not only as a boost to crypto adoption, but a way to change finance itself so payments are faster, more transparent and more affordable,” Mónica said.



Anchorage is a digital asset platform for investors that provides services from custody, trading and staking to governance and financing. It previously announced an $80 million Series C round led by GIC in February of this year.&nbsp;



KKR is a global investment firm with a market capitalization of <a href="https://www.bloomberg.com/quote/KKR:US" target="_blank" rel="noreferrer noopener">$63.37 billion</a>. It manages multiple alternative asset classes, including a private equity <a href="https://www.kkr.com/businesses/private-equity/kkr-portfolio" target="_blank" rel="noreferrer noopener">portfolio</a> composed of 221 companies that bring in over $244 billion in annual revenues. As of June 30, 2021, the firm has over $429 billion in assets under management, according to its website.



Anchorage plans to use the capital investment to improve its infrastructure solutions for global financial firms and financial technology innovators. Additionally, the funds will be used to simplify and expedite clients’ engagement with the Web3 economy, grow its client base and expand product offerings.&nbsp;



<blockquote class="wp-block-quote">&#8220;It will take speed and capital to accomplish the mission we set out in 2017. We raised this round to provide the secure infrastructure needed for crypto to become an everyday part of our lives,” Mónica said. “Both the additional working capital and the access to advice we’ll receive from firms like KKR, Goldman, Apollo, BlackRock and Wellington will help us grow at the pace required to forge a new standard in finance.&#8221;</blockquote>



KKR is also investing in Anchorage’s Next Generation Technology Growth Fund II, which will be its first direct equity investment in a digital asset company. The fund will be dedicated to “growth equity investment opportunities in the technology space,&#8221; according to the company.



This investment is another indication that KKR is interested in diversifying its portfolio into digital assets.



In September, <a href="https://cms.blockworks.co/private-equity-firm-kkr-invests-in-defi-and-blockchain-focused-parafi-capital/" target="_blank" rel="noreferrer noopener">Blockworks reported that KKR has invested</a> as a limited partner in ParaFi Capital’s flagship fund. ParaFi manages about $1 billion and focuses on decentralized finance and blockchain technology. Recently, the <a href="https://cms.blockworks.co/parafi-to-launch-200-million-growth-fund/" target="_blank" rel="noreferrer noopener">company has been making moves</a> to launch a $200 million growth fund.



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