Banking on Crypto: Custody in the Digital Asset Era

A Deep Dive into Cryptocurrency with Industry Leaders from REDeFiNE TOMORROW 2025

The key insights from the session “Banking on Crypto: Custody in the Digital Asset Era,” featuring Diogo Monica, General Partner at Haun Ventures and Co-Founder of Anchorage Digital, and Pailin Vichakul, CIO of SCB 10X. Exploring Diogo's journey, the founding of the first federally chartered crypto bank in the U.S., the evolution of digital asset custody technology, and the future of the crypto industry.

A Consistent Path: From Security Researcher to Founder and VC

• Diogo Monica described his diverse career journey—from a security researcher and early engineer at Square to the co-founder of crypto bank Anchorage Digital and now a Venture Capitalist at Haun Ventures. He revealed that through it all, his core focus for the last 20 years has remained the same: Distributed Systems and Security.
  
  
• Diogo began as a Ph.D. researcher studying the foundational technology that Bitcoin would later use to solve key problems. He then applied this knowledge at Square, where he protected billions of credit card details.
  
  
• Inspired by Silicon Valley's entrepreneurial spirit, he co-founded Anchorage Digital. His latest transition into venture capital was a natural progression from his personal experience as an angel investor in over 150 companies. Diogo views each role as part of a continuous journey, allowing him to seamlessly blend his skills in company-building and investing.

The Birth of Anchorage 

• In 2017, convincing financial institutions to trust two security engineers with billions in digital assets was a monumental challenge. However, Diogo pointed out that at the time, there were no truly credible providers in the market, which gave them a significant advantage.
  
  
• The turning point was realizing that the core problem of crypto storage was a technological and security challenge, not a traditional financial one. In the crypto world, there are no "reversals" or "chargebacks"; if an error occurs, the assets are gone forever. This made a team of highly experienced security engineers the perfect fit for the job.
  
  
• The initial spark for the company came from a real-world incident where a fund lost $1.5 million in Bitcoin and offered a 20% cut if he could recover it. This revealed a market gap: even sophisticated investors lacked expertise in private key management. This led to the founding of Anchorage, a team that renowned investor Chris Dixon described as a perfect "Founder-Market Fit."

The Leap to Becoming the First Federally Chartered Crypto Bank in the U.S.

• Beyond winning client trust, Anchorage made history in 2021 by becoming the first crypto company to receive a Federal Banking Charter.
  
  
• Their goal from day one was to serve large financial institutions, which require working with regulated entities. The charter allowed them to "borrow credibility" from the regulatory system, giving institutional clients the confidence to onboard without conducting their own exhaustive and complex technical due diligence.
  
  
• The path wasn't easy. Diogo compared it to the founder's life: "Being a founder is like waking up and getting punched in the face every day. But building a regulated crypto company is like getting punched in the stomach, too." Nevertheless, this hardship created immense value for the business and became a source of pride for the team that pioneered this path for the industry.

The Playbook for Building a Resilient Business Through Volatility

Beyond overcoming regulatory hurdles, a key part of building Anchorage Digital for the long haul was establishing a business and culture that could withstand crypto's notorious volatility. Diogo shared two crucial lessons:

• Business Model Resilience: Running a crypto business is like playing a game on "the hardest mode" because revenue can drop by 80% during a bear market. The key lesson was to diversify revenue streams away from direct correlation with asset prices. This meant shifting towards more predictable models like platform fees, subscriptions, and dollar-denominated services like stablecoins to ensure survival during downturns.
  
  
• Cultural Resilience: During bear markets, many crypto companies face employee turnover rates as high as 40-50%. The solution is to build a strong culture and hire for "High Crypto Conviction" from the start. This ensures the team remains motivated and aligned with the long-term vision, embracing the philosophy of "build in the bear market, and reap the rewards in the bull market."

The Evolution of Crypto Custody Technology

While business models and culture are vital, the true heart of a digital asset custodian is its technology. Diogo delved into the evolution of custody, from simple cold storage to today's sophisticated security architectures.

• From "Pirate Custody" to Automated Systems: In the early days, "Pirate Custody"—storing private keys on USB drives in safe deposit boxes—was common but carried high risks of human error. Anchorage overcame this by implementing a "Policy Engine," an automated system that replaces manual processes while maintaining maximum security by keeping assets offline and disconnected from the internet.
  
  
• The Perspective on Multi-Party Computation (MPC): As the market demanded faster transactions, technologies like MPC became popular. However, Diogo views MPC as "mostly a marketing term." What matters more is the implementation, as a poorly configured MPC setup can be as insecure as a single private key. Furthermore, MPC is a technique for generating signatures, but it doesn't solve the core problem of how to securely store the distributed key shares.

The Future: Competition, Regulation, and Global Opportunities

• "Co-opetition" with Traditional Banks: Diogo believes traditional banks will inevitably enter the crypto market, but they will move slowly, likely starting with only Bitcoin custody. The relationship will be one of "co-opetition"—a mix of competition and collaboration. Specialized crypto providers will maintain an edge in speed, agility, and support for thousands of diverse assets.
  
  
• The Stablecoin Opportunity: New regulations like the "Genius Act" (a reference to stablecoin legislation) are pushing stablecoin issuers toward regulated custody providers. This is a direct opportunity for Anchorage and a sign that stablecoins are becoming an integral part of the global financial system.
  
  
• The Global Fintech Opportunity: Diogo identifies stablecoins as the "new money rails" that allow fintech companies to build global services from day one, without the traditional need for local licenses and integrations in every country. This presents the first real opportunity to create a "truly global fintech."

ETF Evolution: When Staking Becomes a Key Factor

• Diogo offered compelling insights into the future of crypto ETFs, noting that while Bitcoin ETFs have been a major success, current Ethereum ETFs are incomplete because they lack staking functionality.
  
  
• He emphasized that the 5-7% annual yield from staking Proof-of-Stake assets like Solana is too significant for institutional investors to ignore. An ETF's inability to capture this yield is a major drawback.
  
  
• However, this delay isn't a technical limitation for custodians like Anchorage, who are already equipped to support staking. Instead, it's a legal and structural complexity within the ETF framework itself, particularly concerning regulations and taxes, which regulators need time to approve. The good news is that providers have already begun submitting applications for staking-enabled ETFs—a development to watch closely.

"Money Apps": The Next Wave and an Invitation to Founders

With crypto's infrastructure now more robust than ever, Diogo predicts the next wave will be "Money Apps"—consumer-facing financial applications built on stablecoin rails. These apps, such as cross-border payment solutions or global credit cards, could have a massive impact, especially in emerging markets.

He concluded with a direct message to entrepreneurs:

"If you're a founder looking for an exciting opportunity and your business involves cross-border transactions, look no further. Stablecoins are the new money rails that are changing everything. Build your company on this technology."

Watch the full session here: Banking on Crypto: Custody in the Digital Asset Era