Ben Strack

Anchorage Digital Bank is set to facilitate crypto block trades for registered investment advisers (RIAs) as part of its bid to boost access for financial pros looking to enter the segment.



The offering comes via a link-up with Onramp Invest — a digital asset wealth platform working with US RIAs with combined assets under management of $40 billion. It follows Anchorage introducing custody and settlement services for RIAs in November.&nbsp;



Anchorage Digital became a bank chartered by the Office of the Comptroller of the Currency (OCC) in January 2021.&nbsp;



The firm’s CEO, Nathan McCauley, said <a href="https://blockworks.co/tag/anchorage">Anchorage</a> wants to be a “regulatory solve” for RIAs with mandates to hold crypto assets with a qualified custodian.&nbsp;



Read more: <a href="https://blockworks.co/news/anchorage-digital-eaglebrook-crypto-sma">Anchorage and Eaglebrook link up in bid to boost crypto SMA access</a>



“We’ve been able to do that with a national bank charter,” McCauley told Blockworks. “But then there’s a bunch of specific things about how we can get good execution for clients and solve some of the other problems, and one of those things is block trading.”



Block trades are large securities transactions privately negotiated away from public markets to minimize the trade’s impact on the security’s price.&nbsp;



Onramp Invest CEO Eric Ervin said in a statement that block trading lets RIAs execute multiple trades across their entire book of clients as a single institutional order — a process he added maximizes efficiency and minimizes cost.&nbsp;



<h2 class="wp-block-heading">An RIA market eyeing crypto</h2>



Various industry watchers have labeled RIAs as a wealth management channel that is still relatively untapped when it comes to crypto adoption.&nbsp;



A <a href="https://bitwiseinvestments.com/crypto-market-insights/the-bitwise-vettafi-2024-benchmark-survey">survey</a> published earlier this month by Bitwise and VettaFi found about 80% of financial advisers said they were either unable to buy crypto for clients, or unsure whether they could.&nbsp;



98% of advisers with an existing allocation to crypto in client accounts plan to either maintain or increase that exposure in 2024, the survey found. Crypto equity ETFs were respondents’ top choice when asked what type of crypto investments they were most interested in allocating to this year.



Nearly 90% of respondents interested in buying BTC were waiting for the Securities and Exchange Commission to approve a spot bitcoin ETF. Such funds began trading on Jan. 11.



Read more: <a href="https://blockworks.co/news/sec-approves-bitcoin-etf#">SEC officially approves spot bitcoin ETFs in landmark decision</a>



While an ETF will be an appropriate wrapper for many RIAs, others will likely want to get direct access to crypto assets.&nbsp;



The block trade feature would be for directly trading crypto assets such as BTC and ether, McCauley noted.&nbsp;



“I think in the same way that RIAs support stocks and <a href="https://blockworks.co/tag/etfs">ETFs</a> that are a combination of those stocks, they will want to support spot crypto and the ETFs that are wrappers around the crypto,” McCauley said.&nbsp;



The SEC’s long-awaited approval of spot bitcoin ETFs is the latest in a string of “regulatory and institutional unlocks for the digital asset ecosystem,” the Anchorage CEO added.&nbsp;



Read more: <a href="https://blockworks.co/news/21shares-ceo-interview-bitcoin-etfs">Short-term view on spot bitcoin ETFs ‘a mistake’ says 21Shares president</a>



While such a trend has spurred more interest among RIAs in adopting crypto investments, he noted an “integration barrier” for such professionals continues to exist.



“Right now it’s a decent-sized integration to get [crypto investments] going,” McCauley said. “Over time it’ll be kind of a point-and-click opt-in that will feel very similar to opting in to any other kind of asset.”



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New block trading offering seeks to boost RIA crypto access

Bitcoin asset management platform Onramp is teaming up with BitGo as part of the latest bid to ease the mind of institutional allocators by improving crypto custody.



Designed to avoid a single point of failure, Onramp’s multi-institution custody product seeks to bring more institutional investors, financial intermediaries and high-net-worth individuals into the crypto realm.&nbsp;



The offering divides key-holding responsibilities to three institutions: BitGo Trust, Kingdom Trust and Coincover. Two of the three keys are needed to move the funds at the direction of the end client.



“Investors, whether they admit it or not, have wanted exposure to the best performing asset of the past decade — just not at the cost of their careers,” Onramp CEO Michael Tanguma told Blockworks.



Different types of “collaborative custody” solutions exist, such as offerings by Casa and Nunchuck, Tanguma acknowledged.



But Onramp seeks to differentiate from those providers by working with multiple financial services firms that have their own custody process, onboarding and client authentication designed for institutions, he noted.&nbsp;



“Onramp is only ever legally able to unilaterally participate in the way we sign a transaction, preventing us from ever being able to move client’s funds without their explicit request and authentication with one of the other key holders,” Tanguma said.&nbsp;



<h2 class="wp-block-heading">BitGo, others continues custody push</h2>



Institutional investors have searched for a better way to custody crypto after instances of exchanges not being able to meet client withdrawals, according to Tanguma.&nbsp;



About 38% of respondents of a January <a href="https://bitwiseinvestments.com/crypto-market-insights/the-bitwise-vettafi-2023-benchmark-survey">survey</a> by Bitwise and VettaFi cited custody concerns as something preventing them from starting to invest, or increasing an investment, in crypto assets.&nbsp;



Onramp’s new custody tool is powered by <a href="https://blockworks.co/tag/bitgo">BitGo</a> — a digital asset infrastructure provider not new to this segment. The company’s founder, Mike Belshe, started working on bitcoin multi-sig technology a decade ago, he <a href="https://fortune.com/crypto/2023/08/30/future-of-finance-bitgo-ceo-mike-belshe-crypto-alternative-to-bad-money/">told</a> Fortune in August.



&#8220;BitGo believes that multi-institution custody can reduce counterparty risk and onboard capital on the sidelines to bitcoin,” Mitch Kochman, BitGo’s director of platform sales, said in a Thursday statement. “We applaud innovation in the custody space, new products and services using mult-sig technology, and we’re proud to do our part in enabling them.&#8221;



This isn’t the first custody-related deal BitGo has executed.



BitGo Trust was set to provide qualified custody services and cold storage for assets held by institutional clients of Genesis <a href="https://blockworks.co/news/genesis-bitgo-trust-collaborate-on-custody-product-for-institutions">as part of a deal made earlier this year</a>.



The <a href="https://blockworks.co/tag/ftx">collapse of crypto exchange FTX</a> helped spur increased separation of trading, settlement and custody to minimize counterparty exposure, Adam Sporn, BitGo’s head of prime brokerage, said at the time.&nbsp;



More recently, <a href="https://blockworks.co/news/bitgo-wealth-management-market">BitGo bought HeightZero</a> — a platform designed for wealth managers. BitGo institutional sales director Steve Scott said secure and regulated custody products will be “critical” to registered investment advisers (RIAs) and other institutional investors looking to allocate client capital to crypto.



Others too realize the need for improved crypto custody — particularly after the US Securities and Exchange Commission <a href="https://www.sec.gov/news/press-release/2023-30">proposed</a> in February to require the “safekeeping of client assets” to what they call “qualified custodians.”&nbsp;



Financial advisers can now allocate to the crypto strategies on Eaglebrook Advisors’ platform through “qualified custodian” Anchorage Digital, after <a href="https://blockworks.co/news/anchorage-digital-eaglebrook-crypto-sma">the two companies partnered up</a> earlier this month.&nbsp;Standard Custody &amp; Trust Company sought to blend the security of qualified custody with the control of self-custody as part of a July <a href="https://blockworks.co/news/standard-custody-debuts-crypto-custody-tools">partnership with L1 Advisors</a>.



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Onramp, BitGo introduce latest iteration of crypto custody

<div id="highlights-block_6215454be0bb6" class="highlights">
 <ul>
 <li>The index comprises 13 cryptoassets, with bitcoin and ether making up a combined 53%</li>
 <li>Separately managed accounts are the best way to get diversified crypto exposure in the US, WisdomTree CIO says</li>
 </ul>
 
</div>



A crypto index devised by WidsomTree Investments and Ritholtz Wealth Management is set to become more widely available next week as more financial professionals have indicated interest in the space.



The RWM WisdomTree Crypto Index (RTREE) — available via a separately managed account (SMA) — was made available<a href="https://cms.blockworks.co/wisdomtree-and-ritholtz-wealth-management-launch-crypto-index/" target="_blank" rel="noreferrer noopener"> to Ritholtz clients in December</a>.



In the time since, Ritholtz has opened, funded and invested client cash as it fine-tunes operations, according to Michael Batnick, the wealth management firm&#8217;s managing partner.



“There’s a lot that needs to go into making sure that advisers can get comfortable here, because a lot of people are wary of crypto in general,” Batnick told Blockworks. “So, any sort of funkiness or glitch in the matrix and people will get very nervous.”



Roughly 200 advisers have expressed interest in the index, Batnick added. And Ritholtz is in talks with several multibillion-dollar registered investment advisers (RIAs) about the offering.



The index will become available to all advisers on March 1 through Onramp Invest, which supplies the SMA architecture, rebalancing technology and adviser support. Crypto platform Gemini is its custodian.



Ritholtz and WisdomTree will split a fee of 50 basis points from new investors, while Gemini and Onramp will split a one-time transaction fee of 70bps.



WisdomTree Chief Investment Officer Jeremy Schwartz said during a virtual event Tuesday that the index aims to offer exposure to bitcoin and ether, while capturing potential upside in altcoins.



Bitcoin and ether currently account for 36% and 17% of the index, respectively. Allocations to 11 other coins — Terra (LUNA), Uniswap (UNI), Chainlink (LINK), Polygon (MATIC), Decentraland (MANA), Fantom (FTM), The Graph (GRT), Aave (AAVE), Enjin Coin (ENJ), Yearn.finance (YFI) and SushiSwap (SUSHI) — range from 3% to 7%.



<div class="wp-block-image"><figure class="alignleft size-large"><img loading="lazy" decoding="async" width="1024" height="550" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg" alt="" class="wp-image-17731" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=50 50w, https://blockworks-co.imgix.net/wp-content/uploads/2022/02/RWM-WisdomTree-Crypto-Index-Exposures-1024x550.jpg?w=1862 1862w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: WisdomTree</figcaption></figure></div>



The plan is to review exposures monthly. Avalanche (AVAX), which Gemini doesn’t support, is an asset WisdomTree could add in the future, Schwartz said.



<h3 class="wp-block-heading">Looking to fill a void</h3>



The launch comes on the heels of financial advisers increasingly looking to invest client funds in crypto. <a href="https://cms.blockworks.co/financial-advisors-bullish-on-crypto/" target="_blank" rel="noreferrer noopener">A survey</a> by Bitwise Asset Management and ETF Trends last month found the percentage of financial professionals investing client funds in crypto rose from 9% to 15% over the past year.



An additional 14% said they will “probably” or “definitely” buy crypto this year, according to <a href="https://static.bitwiseinvestments.com/Research/Bitwise-ETF-Trends-2022-Benchmark-Survey.pdf" target="_blank" rel="noreferrer noopener">the research</a>.



“I believe in holding the underlying but in a package that is very similar to what advisers are used to,” Onramp Invest CEO Tyrone Ross Jr. said during the virtual event. “You shouldn’t be scared or worried about custody or cold wallets or hot wallets or anything like that. Let’s take that away.”



Though WisdomTree <a href="https://cms.blockworks.co/wisdomtree-launches-spot-etps-in-europe/" target="_blank" rel="noreferrer noopener">has launched</a> exchange-traded products (ETPs) that offer diversified crypto exposure in Europe, the SEC <a href="https://cms.blockworks.co/when-will-the-sec-approve-a-spot-bitcoin-etf/" target="_blank" rel="noreferrer noopener">has not yet allowed</a> spot crypto ETFs in the US. Schwartz called bitcoin futures ETFs, which the SEC approved in October, “suboptimal” products.



“We saw…from our experience that the SMA is probably going to be the best structure for a long period of time — for sure if you want this diversified exposure,” Schwartz said.



The index is set to launch as crypto markets have dipped recently. Bitcoin is down about 25% since Ritholtz began testing the index, and some altcoins are down even more.&nbsp;



“Obviously it’s not ideal,” he said. “I wish that it had gone the other way, but by no means does this change how we feel about allocating money here.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the On the Margin newsletter</a>.



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