Anchorage Digital, the first and only federally chartered crypto bank, launched its first custody and separately manage account (SMA) offerings for RIAs on Thursday.
Anchorage said the offerings provide RIAs with an option to custody assets with one of the only SEC-approved custodians for digital assets.
RIAs have long struggled for a compliant way to manage crypto on behalf of clients.
Over the last year, the SEC has cracked down on the crypto industry in a bid to tighten regulation and safeguard investors, in part due to the increase in crypto related fraud and the collapse of prominent crypto exchanges.
In February, the SEC proposed a new custody rule that broadened the regulation to include any assets that the advisor manages or oversees. It also requires that investment advisors enter into written agreements with ‘qualified custodians,’ such as banks or broker-dealers.
For digital assets, RIAs until now have had limited options.
“And in many cases, the RIAs actually are forced by the SEC to use a third-party qualified custodian and Chartered Bank. A Federally Chartered Bank is the only real regulatory charter that meets the definition unambiguously,” Diogo Mónica, co-founder and president of Anchorage Digital, said.
The SEC considers most crypto currencies securities, which creates compliance issues for RIAs who want to manage assets on behalf of clients.
As an OCC-chartered bank, Mónica said that’s a non-issue. “It doesn’t matter. We’re a bank and banks can custody securities and we’re the only [federally chartered] crypto bank. So, problem solved,” said Mónica.
Over the past year, the bank has more than doubled the amount of assets it custodies and currently holds tens of billions of dollars in digital assets. Mónica said the company does not disclose the exact number of assets.
Anchorage has already brought on advisory clients, including Eaglebrook Advisors, an RIA SMA platform that collectively manages more than $250 billion in assets, and Onramp Invest, a Securitize company with $40 billion in AUM.
“Lots of conversations are being had with RIAs that don’t have crypto yet and want a solution like this that is turnkey, that is regulated like a bank but allows them to just offer their clients the same type of offerings, security, and compliance that they have in the traditional asset classes,” Mónica said.
The bank doesn’t have any minimum asset requirements for RIAs at this time. Anchorage typically charges large RIAs with SMA business afee around a 1 percent fee in total across custody and broker activities, which Mónica said is the industry standard. The prices vary based on business structure, assets under custody, and trade volume.
Mónica said that for now, the bank isn’t for everyone.
“If you find yourself in a position where you’re a small RIA and your clients really just want bond exposure, then this is absolutely not for you because this has to be client led,” said Mónica. “But what’s happening is that many of these RIAs are finding themselves in a position of ‘I want to attract a younger crowd,’ or ‘these SMA accounts want crypto exposure, even if it’s like 5 percent or 10 percent of the portfolio, and they can’t do it with me and we’re going to lose this client unless I find a solution.’”
Mónica believes that eventually all RIAs are going to need a way to manage crypto for clients. “Every single one of them will have to get there because it just doesn’t make sense for you to not offer access to say real estate or not offer access to bonds in your particular portfolio. It’s not going to be very popular with your client.”
Update: This article was updated to reflect Anchorage Digital’s custody fee and variable pricing structure.