On The Brink with Castle Island - Nathan McCauley (Anchorage) on the evolving banking and custody landscape (EP.595)

Episode Date: February 11, 2025

Nathan McCauley, the co-founder and CEO of Anchorage joins the show. In this episode we discuss: The history of Anchorage and the evolution of the company from a product and regulatory perspective. Operation Chokepoint 2.0 and the debanking of digital asset startups. How banks are approaching the digital asset custody ecosystem and the sub-custody market. The evolution of stablecoins, the prospects of a stablecoin bill and the Global Dollar Network stablecoin consortium. Anchorage's Porto Wallet and Atlas products and the role they are playing with institutional customers. To learn more about Anchorage visit www.anchorage.com

Today on the podcast, I sat down with Nathan McCauley, the co-founder and CEO of Anchorage. As many who listened to this podcast will know, Anchorage operates a federally chartered bank and their major player in the digital asset custody in stablecoin ecosystem, along with many other product lines. This was a timely episode where we talked about the debanking of crypto companies, talked about upcoming policy milestones and priorities, including crypto executive orders, Saab 121 repeal, stablecoin legislation, market structure bill, and a lot more. We also talked about the work that Anchorage is doing with institutions and protocols, the global dollar network, as well as new product launches on the horizon. Think you'll enjoy this one. So without further ado,

here's my conversation with Nathan McCauley. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All these expressed by them or the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guest and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated.

The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easing. print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. All right, Nathan, thanks so much for joining us

today on the podcast. I can't believe you haven't been on this podcast before. So appreciate you coming on. I've been a long time fan, Matt. So very glad to be here. Thanks for having me. And what a week to have you on. So you testified in front of Senate Banking Committee. That's got to be a stressful week for you. So one of those things where it's obviously a very high stakes situation. certainly never would have imagined doing something like that when I was taking the public speaking classes back in college. But nevertheless, was asked to come and tell our story there. So I had a fun time there testifying in Senate Banking Committee this week. Definitely want to get into all of that. People that listen to this podcast probably know a good deal about Anchorage. But for those maybe

who are less familiar, can you maybe just set the table with the company, a little bit of the origin story and the lines of business that you guys are in today? Sure, thanks. So Anchorage is here to serve institutions who want to participate in broadly digital asset ecosystem. And so about seven years ago, me and my co-founder, Diogo, started the company on the assumption that institutions would want to come into digital assets. And at the time, late 2017, early 2018, there were a ton of people in retail that were participating in digital assets, but basically no institutional offerings. There wasn't institutional custodians. There was very few. I think the most institutional trading venue you had was Coinbase Pro. And so it was just a white space. And the basic bet was, hey, if this

is going to be an asset class, it's not going to be entirely driven by retail. It'll also be driven by institutions. And so let's build a set of tools for institutional investors. The natural starting point along that journey was digital asset custody, particularly some of the large investors have to satisfy what's called the qualified custody rule. So they need to hold assets with a qualified custodian. And so it started out with a custody system that really is still the kind of the central point of our company. That's our largest business line and the biggest set of value that we bring to the clients is a safe and secure custody solution. We wanted to take a little bit of a contrarian take with the way that we built custody. We were not interested

in the cold storage solutions where you have to take the assets, take them offline, and then never get to touch them. We assumed that the digital asset ecosystem would mean that you would actually want to do stuff with the digital assets. What we now understand to be things like staking, things like participating in defi governance. So the basic tenant at the beginning was people want to do stuff with their assets, they want to hold it in a super safe way, and they want the whole thing to be regulated. And so along that journey, we pursued regulatory licensure from the very beginning of the company, and then that eventually culminated in us getting the federal bank charter we have with the OCC. So this has been a large part of our differentiation is the fact that we have this national

bank charter. We can hold a whole host of digital asset for institutional investors and maybe just wrapping up on this right now what this means is that we serve basically all of the large holders and types of holders of digital assets, whether it's the VC funds that hold their tokens, they're holding that they've invested in, the digital asset protocols themselves. A lot of protocols decide that they'll TGE with us and hold their initial supply with Anchorage and then use us as the distribution mechanism out for that. And then ETF issuers hold their assets. at Anchorage as a safe, qualified custodial bank for those assets, all the way up to some of the world's sovereign wealth funds, choose to hold their assets with us. So it's kind of that

whole landscape of digital asset investors hold their assets with us. Along that trajectory, it made sense to add additional services. And so we provide staking services for them. We provide trading services and tri-party and settlement services, really all of the stuff that an institution needs in order to support their investment thesis and grow their business. That's really where we focus. I can definitely attest as a user or customer that it's an exceptional platform. The tech is incredible. I think one of the more interesting things that you did highlight there is just the way that you guys went about becoming a qualified custodian, going this OCC path.

It's pretty remarkable, giving everything that's happened over the past three, four years, that was a pathway that you were able to achieve. Maybe talk a little bit about what that process was like and maybe what it's been like after you got the charter. It's a great question. It's been a really funny and fun story for us. That's played out in a lot of different ways, some of them quite surprising. But generally speaking, we wanted to solve this qualified custody rule for our clients.

That meant that we ourselves needed to get regulated. At the time, this was an impossible problem. No one knew how digital asset firms should be regulated, how they should be set up. And so the initial starting hypothesis was actually to try to get a broker dealer. Broker dealers are allowed to be qualified custodians. Spent a bunch of time on that and ended up being a little bit of a dead end. And then we pivoted from that strategy to get a state chartered trust company. charter trust company that we got out of South Dakota, a lot of us to start operating. We're able to

act as a qualified custodian. A lot of our initial growth happened once we got that charter in South Dakota. Opportunity presented itself in the kind of last year of the Trump administration, where there was an opportunity to convert our state charter into a national trust bank. And so we went through a conversion process where we turned that state chartered institution into a federally chartered institution. There took a lot of work, obviously. It's a very serious thing to create a national bank. Lots of compliance processes needed. Really, when you create a national bank, the way the government views it is that you're creating literally a permanent entity. Like, it is expected that the thing that gets created is a permanent fixture. Early on in the process, they wanted to talk about things like continuity plans. Like, what happens when I retire? And at some point, I was like, you guys, I'm 30, it's 35.

five. That's not something we need to worry about yet, but that's the kind of timeframes of thinking about when you create a national bank. And so we completed that conversion process. And so in early January of 2021, we started operating as a national bank. This was huge for us because there's a lot of industry participants that took that signal, like, hey, we got a national bank crypto now. That's almost at tacit approval that is possible to do this business. It's impossible to participate in the digital asset ecosystem. A lot of clients and client growth came as a result of getting that charter. Interestingly, in our charter, we actually got four activities that were allowed to do with our charter, custody of digital assets, staking of digital assets, settlement of digital assets,

settlement of digital assets, and governance of this is pretty cool because of that staking and governance ones. To my knowledge, we're actually the first incarnations of the federal government saying that those activities were even legal and were even allowed at all, the participating in staking, participating in governance. And so we're really proud of that. And to use that to really grow the business on board a lot of clients and really provide a lot of value. to the ecosystem. It's been crazy to see that pathway just got shut down after you guys got it, at least from my perspective. And so what was your view on just the ability to retain that license even? It had to have been pretty hairy over the past couple of years, just given all of the

operation choke point type of activities that were going on in the industry. Yeah, it ends up being interesting thing. So when banks get chartered, as mentioned, I think my team did some research on this, the OCC was actually established by Abraham Lincoln. And as far as we understand it, there has not been an OCC charter that's been revoked since Abraham Lincoln established the OCC. And so there's like, there's kind of this long history that speaks to exactly what I talked about earlier, which is the charters are permanent. They are a permanent institution. Now, that's not to say that things can't be made quite difficult and existing and working under that regulatory scrutiny. But in a lot of ways, I think the regulatory scrutiny that we were under is why a lot of clients

trusted us, particularly, I would say, a lot of other national banks. There are a lot of other national banks and state banks that were actively looking at partnerships with us because of the fact that we had that charter. And they said to themselves, okay, we don't want to become a custodian ourselves, but we'd like to participate in the digital asset ecosystem. Why don't we build out a business model, whether it's using Anchorage as a subcustodian, referring clients over, and then lending against those assets or thinking about things with tokenization where Anchorage could be a partner to us. And so they handle the regulatory licensure of the custody of the digital assets, but we can build a crypto business, use them as infrastructure. This is actually common with

custody banks, BNI, State Street, Northern Trust. Many of them act as the custodian for the other banks. And so this was a very nicely growing opportunity for us there directly after our chartering process. That makes sense. So I want to talk a little bit about the debanking over the past few years. So we became aware of this, I would say just from our vantage point of trying to fund early stage businesses and some of them having a really hard time getting bank accounts and other companies are a portfolio, just getting cashier's checks from their banks and saying, look, you're shut down, take the money elsewhere, and really panicking and having to scramble to make payroll, try to get onboarded somewhere else. When did you become aware that there was some sort of a coordinated activity against the crypto industry?

And curious what your journey was in terms of getting vocal about it, because I think you've done a great service, for the industry and just talking to some of the politicians and making it broadly aware that, look, something bad is happening here. Yeah, I think that the first indication on our side, actually, of that was not what you guys have correctly identified as debanking kind of industry-wide. Our first indication of it was those very partnerships that I was just talking about, the large national banks and regional banks that wanted to get into digital assets. Literally, we're looking at building digital asset businesses, paused those partnership. conversations. So this is like the first hint that something is wrong because we've got like an

industry-wide trend that all of a sudden vanishes. All of a sudden, nobody is interested in becoming a subscodian. Nobody is interested in lending against digital assets. Nobody is interested in doing any of these kinds of things. But I think that's actually really important to note here that all of them were actively trying to become crypto banks themselves. That's the like starting point mental model I have in your head. Banks wanted to come into crypto and we're actively working on it. And so those things start to dry up. And then we see a, steady stream of regulatory filings, maybe some people would call them rules, interpretations, really across a broad swath of the industry. A lot of the attention in the industry focused on this

particularly, I don't know, a hilarious one called SAB-121, which was a deeply specific accounting interpretation that made it impossible for any national bank to come to digital assets because of the way they would have to reserve against those assets. So that one got a lot of press, so I want spent a bunch of time on that. Related to that, those of us that are, in the banking industry and follow the kind of banking nerds, if you will, saw a bunch of these coming out. FDIC had their own interpretive letter that came out. The OCC had an interpretive letter called OCC interpretive letter 1179 that specified that it was actually interpretation that they had that said, you have to come and ask us if you want to do anything in digital assets. Typically,

banks are allowed to do whatever they want. They have to follow what are called safety and soundness guidelines, but they have broad flexibility to almost self-regulate. The way the banks are set up is they have a whole set of internal processes that functionally act as a self-regulatory system. And then the regulators come in and look at those and make sure that the machine that is the self-regulatory apparatus inside the bank is continuing to run as stated. If you get to the point where your real regulators trust you that much, that's what you're able to do. And so this letter that comes out of the OCC says, no, you can't decide for yourself on

this anymore. You've got to come ask us if you can do anything on that. And our understanding is all of those conversations terminated in, don't do it. Like they said, you got to come ask and then don't do it. That's what happened there. Adding on to that, there's this joint letter that came out from Fed, FDIC, and OCC that starts out in its preamble. Banks can do whatever they want. And then follows up with, here's a laundry list, a litany of risky things. And then concludes with, we think doing this stuff is highly unlikely to be consistent with safe and sound banking practices, which to most people is, okay, that's like a pretty boring drab statement. But it's actually like an outright ban.

When you see highly unlikely to be inconsistent with safe and sound banking practices, every bank CEO in the country reads that. Okay, I see what they're trying to say. Do not do that. And so then after that one, that's where we actually saw what you guys have described as debanking. This is where people started losing their accounts. This is where people started getting kicked off the platforms. I heard about this in some cases from my, I have a bit of an angel investment.

I like to invest in my friends, invest in other people around. It started to hear stories of people losing their bank accounts. And then the culmination of that was it actually happened to us. And so that was a nice part of the Senate testimony is like talking a little bit about the story that actually happened to us as a national bank getting debanked. So I guess after all of this and you're down there this week, you're testifying from the Senate banking, are you optimistic that this is changing that the new roster, the cast of characters down there or understanding what happened and taking corrective action? Yeah, I am. I think that if you look at the point of this hearing that we had this, week is really just about getting the ideas out there. The Senate in particular wanted to cast a broad brush on what's happening here. And so I was the one crypto witness where I talked about how this has happened within the crypto industry. But then within the Senate wanted to talk about

general problem, particularly because I think President Trump is interested in this idea of potentially conservatives getting debanked, other disfavored industries also getting debanked. And so it's like a broad question of how do we, and just at this point, understand shine a light on what happened here. So that was really the point of this hearing. That's the one where I shared the anchorage story of getting debanked, which I don't want to spend a bunch of time on it, but broadly speaking, we had a bank that we had a growing relationship with. We'd had them for several years, actively discussing new partnerships. And then just one day, they call us and say, hey, it's over. Your account is closed. And this is particularly ironic because we are a national

bank ourselves. There couldn't be a more regulated, safe partner to work with within the digital industry. It's like a banking account, a basic checking account for a bank. And so us getting our account closed was used as illustrative purpose in the banking hearing, it's in a banking hearing, just to talk about like where this kind of happened, how pervasive it was. And so step one is shine a light on this. There's some discussion about what could happen moving forward. I think there's kind of two camps emerging on which way things should go. And so at least in some sense, there's some room for optimism here in that maybe the Republican side is looking at, okay, how do we make sure that this doesn't happen anymore on behalf of regulatory overreach, if you will? And then,

I would say, nicely, even someone like Senator Warren is looking at this and saying, how do we make sure that this doesn't happen to disfavored political groups, whether it's some of the groups that she mentioned, minority groups that may have had debanking happen, all the way to the idea of conservatives being debanked, general agreement across both sides. the aisle, that this isn't the way that policy should get carried out. Shouldn't be the people lose their bank accounts due to political disfavor due to discrimination, if you will. Overall, felt like pretty positive. I'm going to be carefully tracking where we go from here. I'm really excited to see where we go and want to dive a little bit into some of the policy

milestones here that are about to happen. And in some cases, just did happen. And maybe we could look at them a little bit just through the lens of how positive there for Anchorage, because I think there's a lot of positive momentum here. You mentioned Sab 121, and I think this is just fascinating if you look at it through the lens of, okay, the banks can now play in the custody space. Very few of them have really embarked down the mission of building their own custody stack. And so if you're on the inside of one of these bigger banks that plays in the non-crypto custody space, you're probably having a build versus buy versus partner conversation here. And I would have to think a lot of those institutions would be looking at subcustody is just the fastest way to get something

out. Is that the right way to think about what's about to happen here in the broader banking space? Yeah, I think that's exactly what's going to happen. The reason we've been consistently against Sab 121, despite the fact that it basically cut out the whole industry from competing with us. So like one interpretation of it is it's it gave us a monopoly on crypto banking, which is like cool. But on the other hand, it's like kind of un-American as well. And so our basic thing to regulators there was maybe this isn't the best. And a lot of the reason for that is exactly what you said. most of the banks are going to want to choose a sub-custodian partner that they'll want to work with, and they're going to choose to work with the national bank.

We had already kicked off a bunch of those conversations before some of this got shut down. Those are picking up and already picking up in earnest in a real way. So I expect one of the themes of our public messaging for the rest of the year is going to be announcing some of these partnerships, where Wall Street firms are going to decide, hey, it's time to partner with a digital asset firm in order to get something to market. and that that's the way to get to market fast, deliver value to your clients, and get this really going. The alternative path is to decide to become a custodian themselves and build it internally. You're at Fidelity, right, for a long time.

What they have pulled off is a modern business miracle. It is incredible that they have built a custody system internally that holds Bitcoin. People should write books about how incredible that effort has succeeded. But I think a lot of people look at that, the great success there has thus far only gotten them to Bitcoin. And that's just not the shape of the ecosystem. There are so many different assets. And so people look at even just like the asset support complexity over time and say, hey, if we want to really participate in this space, it's going to have to be a partner program

where we partner with somebody. And I think a lot of them are going to decide, hey, this is not just tech that we need. It's also regulatory solve. And working like an Anchorage gets us both at the same time. I would love to be on the inside of some of these board discussions at these banks. specifically because you look at this and say, okay, we could build it, but is that three years, is that four years? How many people are we going to have to hire? Can we actually hire the right people? Or then you look at M&A and there just actually aren't that many things to buy. It seems like

a very interesting market structure where there's just not a lot of options. And I would think that the subcustody just becomes the fastest way to get something out. I think that's right. The amount of recruiting that needs to happen in order to build a team that can build this whole thing, and then you have to retain them through down cycles. You have to keep your composure as crypto goes into a bear market, continue working on it through the bear market. If you're trying to get something done on a reasonable time horizon, partnership ends up being the way to actually have success. And you're right, there's, putting it bluntly, there's many banks that would like to come in and relatively few custodians. Like I mentioned before,

this isn't a surprising situation. This is how most of the large banks choose to implement custody anyways is they'll partner with a BMI or State Street to be their custodian bank. They'll stay into the other businesses that are more in their lane. And so assuming that that will happen within the digital asset ecosystem is actually, you might even say the base case assumption of how this market structure plays out. Yeah, that's spot on. So I want to talk next about stable coins. It seems like the stable coin bill is the one that could potentially get brought up before market structure, although I'd love your thoughts on that. But it seems like stable coins are pretty far down the path of having some sort of a bipartisan consensus. There's bills that have been drafted in the

House and the Senate. Want to get your view on just where that legislation is and then would love to use that as an opportunity to talk about global dollar network and how you guys have thought about playing the stable coin space. This is a funny one, Matt. I think the new administration coming in is just moving incredibly quickly. And this speed of execution almost feels contagious. And so in a lot of the conversations I had in the Senate, even over the last couple of weeks, has been like, hey, we want to move, we want to move quick. We want to follow in that week. We had the incredible press conference from David Sacks, where David got up with congressional leadership and Senate leadership to chart the course for regulatory clarity coming to the digital asset industry and specifically talk about stable coin bills, which then got introduced in the same day. And then the even broader one, a brown market structure. So current best guess, which by the way, it changes all the time. But current best guess looks like we're looking at stable coin legislation likely coming first, then followed by market structure. Right now we've got two versions of these bills. We've got the Haggurdy bill in the Senate. And then the House complement to that. Each of them have a bunch of good ideas. And I think there's going to be room for some thoughtful debate about the way we want to go here. But I think the larger point comes to this point that David Sachs made, which is this must be a strategic asset of the United States. So, Trump talked about that back at Bitcoin Nashville. David Sacks is singing from the same hymnal now and talking about this needs to happen. And so I think that's a big reason why stablecoins might be coming first is that they understand that this is key to dollar dominance over the next century. I think that's spot on. And so I guess the logical next question to that is who's going to want to enter this market? Do you issue your own stable coin? Do you join a syndicate? You guys must have thought about launching your own stable coin at some point, I'd imagine. But what led you to this global dollar network concept? global dollar network is at its core. The idea there is a couple of things come to mind.

First of all, we need a regulated, globally accepted dollar. And if you just think about the way that the dollar itself works, the way that the dollar itself works is that it's fair in that the people that interact with the dollar are able to build business models on the dollar where they share in the economics. And so, as an example, banks hold dollars, and then they have a direct business model they can build on top of that. Payments companies build on top of the dollar,

and they have a natural business model they can build on that. Unfortunately, if you look at something like USDC, it does not have a model where you can actually build on it together. What happens with USDC is all of the yield, all of the financial participation, goes to two entities.

that one of those entities happens to be competitive with the entire crypto market. And so that's like a little bit of a bummer there. All things considered, it would have been nice to not have to do something new. And if we had just had a existing stable coin that actually could be global infrastructure, would have been nicer to stick with that. Unfortunately, one doesn't exist and certainly isn't USDC. So what we need is something that actually shares in the economic opportunity with everybody that's contributing to it. And so what happened with global dollar was basically that,

that notion that I just shared with you, a series of probably five, six crypto CEOs came to me and said, hey, Nathan, can you please make a stable coin that's fair and that we can all work together on? Because, you know, somebody was like, hey, I've minted billions in USC, holding hundreds of millions, and I'm getting nothing. And I was like, oh, yeah, that's true. And then you hear this enough. And you're like, okay, something else needs to happen. So that kind of nucleus is the core of the idea of a global dollar where we can bring everybody in to this, stablecoin, and they can share in the economics. The other theory on is like, why does it need to be a consortium? Why not just have each and every one of us make our own dollar? Anchorage dollar,

Cracken dollar, robin' dollar, whatever. And then that's where you come to, okay, we need global liquidity to be able to work together. And so the consortium model, I think, is the winning model, where a bunch of people come together, say, hey, we're going to work together on a stable coin. It's going to share economics with the distributors, those who are helping to grow the network. those distributors can decide to however works for them, share in some of that with their clients. But generally speaking, it should be a scalable, stable coin. And early indications from the kind of the reach-out that we're getting there

is that this is a really powerful idea. A lot of people are coming to us and say, hey, I want to join the consortium. I want to be part of this. I want to take Global Dollar and have a pronounced experience within my interface. And so I think what you're going to see over the next several months is a lot more people join that consortium and say, I want to be part of this.

I want to be part of this global. dollar that can actually be regulated, fair, and actually act as market infrastructure for the whole ecosystem. I've often thought about what this would look like at true institutional scale. If you wanted to use a stable coin to settle overnight repos, I don't think there's anything in the market right now that's just big enough to facilitate that and you'd have credit risk issues. But it does seem like the consortium model is maybe the only one that could really get you to that level where you're doing true trad-fi settlements and taking advantage of a blockchain to cut out access to the Fed wire window at the end of a day. Yeah, I think that's right. So it'll be interesting

to see how that plays out. The other catalyst here, I think for you guys would be a market structure bill. And we've gone through this whole history of crypto without having clarity on tokenized securities. And there's all sorts of ideas that have been bandied about around taking things that exist in the real world, actually having the token itself be a security. Will Anchorage be a player in market as it develops here? The tokenized securities area is, it's interesting. We've, as I mentioned earlier, been looking at broker-dealer from the very inception of the company, always assumed things would go in this direction that assets would be brought on chain. Stablecoins are the first instantiation of this, but why not bring in other things? As far as I understand right now,

we are the largest custodian in the world of tokenized T-bills, tokenized money market funds, big in Biddle, big in Superstate and some of the others. We're going to be a big player in this space. I think exactly what the economic models are for this, what drives adoption into these assets is something that is still to be figured out. There's still some good experimentation to be done. A lot of that experimentation, though, was hard without a market structure built. You're correct to point out that market structure and clarity around this is going to drive some of what I would call the product discovery that needs to happen there. and that product discovery will lead to the use cases that really take hold. And so unfortunately, this is one where the regulatory uncertainty is maybe in meaningful ways holding back the experimentation is needed that is actually want to figure out exactly how this plays out.

And so market structure being something that's on the docket for this year is pretty exciting and that we could really get that unlocked that allows the experimentation that's needed. I've probably sound like a broken record on market structure on this podcast because I talk about the need for a bill to get this clarity. and then you figure out how the secondary trading can work. Sometimes I forget that the SEC can actually do rulemaking and propose rules and work with industry.

And actually seems like that is starting immediately, even though we don't have a confirmed commissioner of the SEC. So maybe you end up in a world where the SEC has put out some proposed rules and that coalesce as well into a market structure bill. I think that's actually a really important point to make. And this is not specific to the SEC. The SEC can release interpretive guidance that provides a clear, road. The banking regulators can provide interpretive guidance and pretty clear road. And so can the

CFTC. And so actually, the federal regulatory agency has a broad set of latitude to themselves decide that this will happen. Where we might need to think about the market structure bill is how each of those agencies interact. Some of the cross-agency dependencies are probably most appropriate for a bill to come through. But you're right. A broad set of latitude and understanding can come through the regulatory agencies themselves drawing the path forward. That market structure bill, at least in my mind, is something that has the potential to spur just a ton of innovation and net new companies and protocols getting off the ground. Just take a file coin, for example, and how much money they've had to spend on legal fees

over the years and have this question of, okay, is this thing a security? Is it a commodity? But if there's actually a clear path there, I just think you'll see more protocol innovation. I would imagine the protocol side of your business would actually benefit. tremendously. I think so. I think there's a huge amount of entrepreneurs that want to build protocols. And I think that's part of what's been sad about some of the amount of regulatory uncertainty has been, frankly, the number of protocols that have not come into existence. It's very natural for us to talk about, like, how much file coin has gone through on the debate of security or not security. It's much harder to tell the story of the file coin that was

never to be because of people not coming into this. And I think that the underwater part of the iceberg that is really worth considering. So I think you're exactly right. There's a bunch more that'll happen once we have clarity and rolls the road here. You're an entrepreneur. You know what it's like, but you don't want to sign up for just getting punched in the face for four years. I think there's a lot of ideas out there that now will be attempted. So that'll be super interesting to see. I'd love to maybe just talk a little bit about what's on deck here and what you guys have pushed out from a product perspective as we close. Maybe talk a little bit about Porto wallet. And I think that's been a great product edition for Anchorage. Yeah, we got two

growth areas that have been really helpful to the overall Anchorage product suite. The first one is Porto. Second one I'll come back to is Atlas. But Porto has been wonderful in that it takes the very nice usable aspects of the Anchorage digital system, makes it available in a self-custody wallet so that people can decide basically use it as software to allow them to do whatever they might want with that. A lot of the people that are using Porto are using it for on-chain interactions. So being able to interact with smart contracts, we got some protocols, actually, that are the entire orchestration of their protocol is now running out of Porto. And so this has been a really good use case where really just administrating the protocol itself is happening through Porto. And then a whole

host of, say, funds like yourself or trading, trading funds that are looking to do on-chain Arbs take the Porto infrastructure and allow them to do on-chain interactions. It's really a nice wallet in that it allows you to do not just Ethereum-based transactions, but also other layer ones you can work with as well. So it's very flexible, but also easy to use. And so we're pretty proud of that and looking to see that grow over the next year. Next one I'll just mentioned briefly is Atlas. Atlas is a really nice settlement tool that allows people to do both bilateral and tri-party relationships. And so the easiest, example is like, who goes first in an OTC trade. Do I send the Bitcoin or do you send the

ETH or who sends the dollars? What Atlas allows you to do is both sides commit and then the swap happens simultaneously. This dramatically reduces counterparty risk and we think is going to be necessary as institutions come into the space. There's a lot of institutions that come into crypto and the first head explode that they have is settlement isn't solved. Really like somebody has to go first and this is a debate that we have in the contracts. And so getting that solved at an institutional level, I think is going to be a big unlock to really make the whole ecosystem and institutional infrastructure safer and feel and smell more like what traditional finance feels like. Frankly, as boring as that might sound, is actually going to be a big unlock for institutions

to be able to come in. And it turns out that once you have that base layer of safe settlement, there's all kinds of interesting stuff that you can build on that, say tri-party lending agreements where people can hold assets as collateral, somebody else can lend against them. And Atlas, I think, is going to be really big for banks that want to come in. Particularly, they don't want to become the crypto custodian, but they have a good amount of cash that they'd like to lend against crypto. And so you can use Atlas to allow the clients to hold the Bitcoin or other assets as a collateral asset for a loan and have the tri-party relationship set up really nicely so that they can perfect security interest in the collateral and use that to build up a business model there. So Atlas and Porto, I think, are really a nice. growth there is this year and going to be interesting to see how they play out. I know it's not one-to-one

comparable necessarily, but Atlas in some ways makes me think of the Silvergate Exchange Network and just how critical the piece of infrastructure that was for a moment. And it's crazy to think that as an industry in some categories, we just have inferior infrastructure than we did two or three years ago. And it just seems like there's a lot to be built there on that settlement side. It's a bit of a bummer. But I think the way that we thought about it is how do you go beyond something like a Sen or a Signet? What does that really look like? And our theory on that is that it should be dollars in crypto should be able to settle in that instant transparent way. And so not just the dollar leg, but that bilateral relationship, being able to build up

the Shrive Party relationships on that. And so we're thinking about it as a bit of a bigger vision than something as unfortunately basic that we no longer have, which is like instant settlement of dollars. So yeah, we want to make sure that's front and center and that's almost a spiritual successor to something like a center of silver game. Nathan, appreciate you coming on the podcast. and thanks for all you're doing for the industry in terms of getting out there and actually telling the story, being the credible person that we can put in front of regulators and politicians.

It goes a long way. Where can we send people to learn more about Anchorage and the product lineup? A few places. Anchorage.com is our website and then feel free to hit me up. I'm Nathan at Anchorage.com. You want to email me. I can help bring people into the ecosystem and get started with accounts to Anchorage. Awesome. I enjoyed this.

Thanks for coming on. Thanks so much for having me, Matt. Appreciate it. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. Visit castle island.vc. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website.

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