Lincoln Bartlett, Head of Trading at Anchorage Digital, believes crypto will be strengthened as an asset class as the industry begins to mirror traditional finance in the U.S., saying that a shift away from crypto’s anti-intermediary roots is inevitable.
Retail traders that embraced crypto early on can self-custody assets and trade on various exchanges as they please, but wide swaths of institutional investors remain subject to rules and regulations that stifle access to the nascent crypto market.
In an interview with Decrypt, Bartlett said it’s only a matter of time until “time-tested standards” are lifted from Wall Street and become the norm in crypto, such as the segregation of customer funds from those owned by the exchanges themselves.
Pointing to the collapse of several crypto firms like FTX last year, and an uptick in regulatory scrutiny that’s followed, he said, “Regulations that have focused on [a] fair market structure are coming to the forefront.”
Anchorage became the United States’ first federally chartered crypto bank in 2021, receiving approval from the Office of the Comptroller of the Currency (OCC) and setting the San Francisco-based firm up to offer crypto custody solutions at scale.
Yet the lender finds itself amid a shifting landscape of options for institutional investors seeking crypto exposure. BlackRock is pushing forward with its spot Bitcoin ETF bid, and EDX Markets, a crypto exchange backed by several Wall Street titans, recently conducted its first trades.
“If they only had access to primitive technology and unregulated platforms, […] then institutions would not be coming, frankly,” Bartlett said. “These huge, multi-trillion-dollar firms require a level of technology security, regulatory protections, understanding, and clarity.”
The company’s federal bank charter makes Anchorage “unambiguously a qualified custodian,” Bartlett said, adding there’s more of a gray area for other firms that don’t have the same level of approval from the OCC.
Compared to EDX, which offers institutions the ability to trade just four digital assets, Anchorage’s offerings are currently more expansive.
Through Anchorage’s trading desk, investors can trade over 90 tokens in a regulatory-compliant manner. As a custodian, the firm also offers clients the ability to hold 200 different tokens.
Bartlett underscored the fact that Anchorage operates an agency trading desk, meaning it does not have any ownership over the assets being traded. This, Bartlett said, prevents conflicts of interest in execution.
“Our incentives are completely aligned with the client,” he said. “We are not trading against clients—in other words, taking risk against them—and we just charge a fixed fee.”
Bartlett also highlighted that Anchorage’s newly launched advanced trading platform lets institutions conduct trades across several liquidity providers without needing to onboard with each exchange or dealer. This provides “huge time savings and risk savings,” he said.
No stranger to the floor of the New York Stock Exchange, Bartlett’s career includes 13 years as a trader and portfolio manager, working across several asset classes. He joined Anchorage last January, having spent nearly a decade at Vanguard before.
“I went from a more mature market structure to less mature,” he said. “And what we have is quite mature and solving a lot of problems that institutions need to address.”
Witnessing crypto’s recent challenges, Bartlett described the collapse of FTX as a “serious setback for the industry,” tarnishing the reputation of the overall technology. However, he said, the “potential for accelerating crypto regulation” is a silver lining that “will bring safeguards to the wider industry.”
From his point of view, there were also valuable lessons learned within crypto about proper risk management following the fallout from collapsed hedge fund Three Arrows Capital.
“While these were not positive events, they further emphasized the vision of our company,” Bartlett said. “It’s been a tumultuous year, but the Anchorage digital trading desk has gotten through it without any losses and allowed clients to trade throughout.”
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