Asset management firm 21Shares has added Anchorage Digital Bank and BitGo as custodians for its spot cryptocurrency exchange-traded funds (ETFs), the ARK 21Shares Bitcoin ETF (ARKB) and the 21Shares Core Ethereum ETF (CETH).
Anchorage Digital Bank and BitGo will work with current custodian Coinbase to strengthen 21Shares' spot ETP operations in the U.S., according to a statement on Sept. 12. The company selected the two companies due to their track records of strong regulatory compliance, security, and reliability.
The move brings the number of ETFs for which BitGo serves as custodian to four. BitGo already has partnerships with two other ETF issuers, including Hashdex and Valkyrie (now Coinshares).
Andres Valencia, head of investment management at 21Shares, emphasized the importance of custodial partners in risk management and operational excellence, noting that diversification enhances the safety and security of the products offered.
Nathan McCauley, co-founder and CEO of Anchorage Digital Bank, said the bank's federal charter overrides state-specific regulation and qualifies it as an asset custodian, making it a natural choice for diversifying ETP custody.
Meanwhile, BitGo CEO Mike Belshe said:
“BitGo is proud to offer 100% cold storage as a leading independent custodian that has served the industry as a trusted partner for over a decade and now serves ETF issuers.”
“Single point of failure”
21Shares' decision to expand its custodianship comes following a recent warning from the FBI that hackers linked to North Korea have been targeting cryptocurrency ETFs in recent months.
The development has brought renewed attention to Coinbase's dominance in ETF custody services and raised the issue of its need to diversify to other custody service providers. Coinbase is the primary custodian for eight of the 11 U.S. spot crypto ETFs.
ETF Store president Nate Geraci recently predicted that more issuers will likely start diversifying their custody in an attempt to “minimize the risk of single points of failure.”
Eric Balchunas, senior ETF analyst at Bloomberg, agreed, suggesting custodians are diversifying due to the high fees charged to issuers compared to other asset classes. He added that some investors may also be tempted to leave Coinbase for cheaper alternatives or use more choice as a lever to renegotiate fees.
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