Acting Comptroller of the Currency Brian Brooks may be on his way out the door, but he gave the crypto community another push into the financial mainstream on Jan. 13, granting cryptocurrency custodian Anchorage status as a federal bank.
The conditional approval of Anchorage’s national trust charter application “makes Anchorage Digital Bank National Association the first federally chartered digital asset bank in history,” said Anchorage CEO Nathan McCauley and President Diogo Mónica in a statement provided to Modern Consensus. They added:
“This is a major milestone, not only for us as an organization, but also for the crypto industry and the wider financial world. Crypto deserves a bank, and we are immensely proud of being approved as the one to set the standard.”
A number of other companies have applied for banking charters, among them Wyoming Blockchain Coalition co-founder and Wall Street veteran Caitlin Long’s Avanti Financial Group, which in July launched a state-chartered bank, Avanti Bank & Trust.
And on Dec. 9, cryptocurrency custodian/broker and PayPal partner Paxos, which holds a New York State Department of Financial Services (NYDFS) trust charter, announced that it is seeking a national trust charter. The reason, Paxos General Counsel Dan Burstein said in a blog post, is that OCC-issued national charters are “designed expressly to allow banks to conduct business across state lines more easily.”
Having a federal charter puts Anchorage’s bank “firmly on the same regulatory footing” as any national bank in the U.S., the pair said. “Today marks a truly meaningful step forward on the journey toward a more fair, equitable, and secure financial system.”
Noting that the industry is “currently witnessing the rise of institutional crypto adoption,” McCauley and Mónica said that “as a federally chartered bank with fiduciary powers, Anchorage Digital Bank will unequivocally meet the definition of Qualified Custodian, giving institutions a straightforward way to meet their obligations under federal law.”
In nearly all cases, the U.S. Securities and Exchange Commission requires investment advisers “to maintain client funds and securities with a ‘qualified custodian’”—a designation that it controls.
These can be banks, registered broker-dealers, futures commission merchants, or certain foreign entities that maintain each client’s funds and securities in a separate account in that client’s name, or under the name of an investment adviser.
McCauley and Mónica argued that the charter makes Anchorage Digital Bank the first institution to be able to offer major institutional investors the “technical sophistication to securely handle digital assets” in the fast-moving crypto industry as well as the “robust regulatory framework” of a federal banking charter.
In November, Anchorage announced that it had passed a rigorous SOC 1 Type 1 audit administered by Ernst & Young for the American Institute of Certified Public Accountants.
A SOC 1 audit is a snapshot of a firm’s financial reporting. Anchorage said at the time that it is also working on a SOC 1 Type 2 audit, which examines financial reporting over a period of at least six months. The prestigious certification is highly regarded by pension and hedge funds, endowments, and other institutional investors, many of whom are starting to jump into into crypto.
Both Coinbase Custody and Gemini Trust have completed SOC Type 1 and Type 2 audits. The SOC 2 certification focuses on how a company secures and protects its customer data.