- Anchorage Digital is the first “crypto bank” in the United States after receiving a federal charter in January.
- The Anchorage co-founder explains how institutional clients are changing their portfolios âsignificantlyâ.
- And explains how customers view DeFi along with 6 areas of the DeFi market that excite him.
- See more stories on the Insider business page.
In January of this year, a significant milestone was taken in the crypto world when Digital anchor became the first federally chartered crypto bank in the United States.
Launched in 2017, Anchorage aimed to address the growing need for institutional crypto custody. Now he’s turned into a full service crypto banking provider offering institutions services ranging from on-call to staking and negotiation.
âAnchorage’s mission is really to be that portal between traditional finance with our charter and crypto with our technology,â said Diogo MÃ³nica, co-founder and president of Anchorage.
The charter, which is regulated by OCC, puts Anchorage on an equal footing with financial institutions, such as Bank of America and Goldman Sachs, in terms of regulatory oversight.
Since receiving the charter six months ago, a lot has changed in the crypto world.
A formidable running of the bulls began earlier this year, with more institutions on board and Bitcoin (BTC) hitting an all-time high above $ 64,800.
But in a matter of weeks, bitcoin and other cryptocurrencies have fallen by more than 50% amid concerns over increased regulation, especially in China.
Bitcoin is currently trading around $ 31,900.
Insider spoke to MÃ³nica to find out how the institutional appetite for crypto has been in Anchorage amid the volatility. He also unboxed the company’s foray into DeFi and outlined six key areas to watch.
âAs the prices started to go down, we got more and more calls for people to increase the credit limit, so they could buy more,â said Monica. “They see it either as a great entry point, if they are investors … and for a large majority of our clients who are just building in space, nothing has changed.”
Most institutions have horizons of 10 to 20 years. They look at volatility very differently, Monica said.
Some are in the process of building projects, MÃ³nica said, which can take between two and three years to build and at least a year to hit the market.
“None of them [projects] have stopped or fallen in priority due to any price action in the market, âMÃ³nica said, describingâ very ambitious âcrypto projects being undertaken by fintechs, bulge support banks and exchanges.
Connection to DeFi
Anchorage has recently branched out into staking, lending and trading services. Most of them are related to the decentralized finance (DeFi) ecosystem.
âWe have also seen our clients in important ways change their portfolios and broaden their investment horizon to also include DeFi,â said Monica.
DeFi projects aim to remove financial intermediaries and allow direct transactions between two parties. Projects often raise funds and provide governance through the issuance of crypto tokens. For example, ether is the native token of the ethereum blockchain.
âThere are very few Anchorage customers who only have bitcoin, very, very few,â said Monica, âAll of them have a multi-coin wallet, although externally they only talk about bitcoin, many of them are actually investing in these new projects. “
This is for two reasons:
1) The potential of DeFi
Institutions recognize that DeFi is one of the most exciting things to come out of crypto and want to align with it, MÃ³nica said.
2) Symbolic exhibition
Some institutions make venture capital investments. To invest in this space, they need to gain exposure through tokens rather than stocks.
It echoes venture capitalist Michael Anderson recent perspectives on how investor mindsets will need to change to understand decentralized autonomous organizations (DAO).
6 DeFi zones to monitor
Monica spends much of her free time investigating the DeFi space.
âIt’s even difficult for someone who spends 120% of their time in the crypto ecosystem to really stay on top of everything that is going on. [in DeFi]âMonica said.
He breaks down 6 areas of the market that excite him.
1) Growth of stable coins
âBoth DAIs are proving to be a strong and stable DeFi coin for even the growth of stable coins like the USDC which have gained tons of traction in terms of integration,â said MÃ³nica.
Monica is excited about NFT networks like To flow, which facilitate participation in the creation of NFT marketplaces.
3) Decentralized insurance
Companies like NexusMutual offer whole new ways to access insurance markets.
âNow we have the ability to insure and participate in the increase, and obviously the decrease in participation in the insurance markets. Monica said.
4) Yield generating stable coins
Stable coins generating returns will be versions of the US dollar that will automatically generate returns. Monica likens it to a yield-generating checking account.
âThere is no way for you to own this asset without generating interest, there is no product that you should opt for. [to]âMonica said. “… [just] holding it allows you to generate interest.
5) Fiat less banks
âI think you’re going to see the rise of Fiat banking less in 2021, if not 2022,â Monica said.
These companies will provide banking services, fundraise, and pay wages through stablecoins. They provide applications on phones containing stable yielding coins as checking accounts. Individuals could then take advantage of Visa cards to swipe and spend stablecoins from the app wallet, as well as the bank being able to settle natively through Visa.
âAt no time does this institution touch a fiat,â Monica said. “It’s incredibly exciting.”
6) Robot advisors
He also expects advisor bots to make it easier to play in DeFi markets, which are notorious for being user-friendly.