Anchorage Digital to bring block trading to advisors

Anchorage Digital, a San Francisco technology company that provides custody of digital assets, is partnering with the San Diego-based wealth management firm Onramp Invest to help registered investment advisors buy and sell cryptocurrency on behalf of their clients.

Public perception of cryptocurrencies has been quite volatile in the last few years, between the collapse of Sam Bankman-Fried's crypto exchange FTX and the Securities and Exchange Commission's approval of 11 exchange-traded funds tied to the spot price of bitcoin on Jan. 10. But leaders of both Anchorage and Onramp predict that the bank charter, combined with Onramp's network of RIAs, will provide the stability necessary to convince wary investors to enter the market.

The crypto bank formally debuted its block trading product on Wednesday, allowing advisors to purchase and sell large amounts — or blocks — of digital assets in a single institutional transaction across their entire book of clients. This service, which is the latest addition to Anchorage Digital's custody and trading offering for RIAs that went live in November of last year, is intended to maximize efficiency, minimize cost and offer equitable execution for clients. 

Using Anchorage Digital tools that have been integrated through API connections to Onramp Invest's wealth management platform, RIAs can help their clients invest in digital assets held by Anchorage Digital Bank, which is a qualified custodian. Trading is done through the bank's affiliate company, Anchorage Hold.

"At the end of the day, Anchorage Digital was designed to unlock greater institutional participation in the digital asset class — and our partnership with Onramp Invest is helping to do just that, by expanding access to advance the growth of the ecosystem," said Nathan McCauley, co-founder and chief executive of Anchorage Digital.

The case for more crypto-friendly banks

Block trading, in addition to allowing a higher quantity of assets to be bought and sold, also allows for a greater level of privacy, as transactions are usually conducted between parties rather than through an exchange. This is known as "over-the-counter" trading.

McCauley said uncertainty surrounding the SEC's proposal to extend its custody rules for investment advisors to cryptocurrencies makes it important to "safekeep client crypto with a qualified custodian.

"The trend of regulatory unlocks, from our industry-first federal bank charter to the SEC's recent approval of spot bitcoin ETFs, is showing crypto is here to stay and safer ways to access crypto continue to drive demand from institutions and consumers alike," McCauley said.

Despite the slow shift of regulatory temperatures toward digital assets, financial advisors have worked to stay educated about cryptocurrencies over the last few years, as consumer interest continues to rise.

In the credit union space, BankSocial hopes to follow in the footsteps of Anchorage Digital's success in getting regulatory approval. The Dallas-based distributed ledger technology firm has applied to the National Credit Union Administration for a federal credit union charter so it can provide crypto services to members of Block Advocates, a nonprofit organization founded by Wingate to help promote the adoption of distributed ledger technology as well as the Texas Blockchain Council.

But experts say that banks and other institutions remain hesitant to engage with digital assets at any level, even exchange-traded funds tied to the value of bitcoin, citing heightened regulatory scrutiny of such partnerships and other factors.

In a previous interview with American Banker, Joseph Silvia, former counsel at the Federal Reserve Bank of Chicago and a financial institutions attorney at Dickinson Wright, explained that banks may not be able to afford expensive crypto projects in the wake of the banking crisis early last year.

"I may be too skeptical here, but [spot bitcoin ETFs] are not the economic or banking environment where any extra cash banks have would be put toward these vehicles," Silvia said. "Couple that with the funding and liquidity challenges banks are grappling with in the wake of the March 2023 failures and slower economy, and I really don't see much interest."

Both investment advisors and bank executives alike will proceed with caution as regulatory temperatures toward cryptocurrencies and other digital assets continue to evolve.

"Just because the emerging market is new doesn't mean it has to be complicated, and it's important that RIAs" have access to the traditional financial tools they're used to, but geared toward a new area, said Eric Ervin, CEO of Onramp Invest.