US-based cryptocurrency assets platform provider Anchorage Digital raised $350m in a series D round featuring digital payment platform PayPal, quantitative trading firm Alameda Research, cryptocurrency exchange Kraken and investment banking firm Goldman Sachs, valuing the company at over $3bn as institutional investors are set to move further into the crypto space.
Private equity firm KKR’s Next Generation Technology Growth Fund II led the round, which included Singaporean sovereign wealth fund GIC, funds and accounts managed by BlackRock, Andreessen Horowitz, Delta Blockchain Fund, Blockchain Capital, Senator Investment Group, Standard Investments and Wellington Management.
GoldenTree Asset Management, Innovius Capital, Apollo credit funds, Lux Capital, Thoma Bravo and private investor Elad Gil filled out the participants in the round, and PayPal took part through its PayPal Ventures subsidiary.
Founded in 2017, Anchorage provides custodian and trading services for digital assets, particularly for large financial institutions and institutional investors that have in the past been wary of moving into what is still a relatively new investment space.
In January this year, Anchorage became the first digital asset bank to receive a federal banking charter from the Office of the Comptroller of the Currency (OCC) in the US, marking a significant milestone in the mainstreaming of cryptocurrency and opening the door for a large number of players previously hesitant to invest in crypto, blurring the line between crypto finance and traditional finance.
Both Anchorage and Kraken – which invested in this latest round – had previously also received state banking charters, but those are based on fragmented structures, and the federal one was a major step that meant large financial institutions and banks could give their clients access to digital assets and hold them on their behalf.
Its federal charter sets it apart from many other similar service providers while on the other side it claims its knowledge of decentralised finance gives it a lead over other existing chartered financial institutions. The latest deal also marks KKR’s first direct equity investment into a digital asset company.
In another potential advantage for Anchorage – though less so for the sector itself – the new acting OCC head last month slowed down the entry of new crypto banks into chartered status, setting higher risk-management thresholds designed to make banks jump through more stringent hoops to demonstrate that they have the appropriate risk controls in place before they can engage in large-scale crypto activities.
As the demand for crypto grows and its applications expand far beyond simple speculative investments, there will be a higher need for crypto-based and decentralized finance products services. This is a trend already visible and has resulted in investors slightly lower down on the risk spectrum than what crypto has typically seen – such as asset managers, endowment funds, family offices and corporate treasuries – deploying more capital behind it.
Anchorage will use proceeds from the round to grow its product lines for financial services and fintech clients, including to help large institutions move around in the space, and grow its team and client base.
The company raised $80m in a series C round in February this year led by GIC with participation from Andreessen Horowitz, Blockchain Capital, Lux Capital and Indico Capital.
Payment service provider Visa took part in a $40m series B round in July 2019, led by Blockchain Capital and featuring Andreessen Horowitz. Just six months earlier, Andreessen Horowitz had led a $17m series A round that included Khosla Ventures and assorted angel investors.
