Payment processor Visa along with specialist VC firm Blockchain Capital helped Anchorage, an institutional custodial service, raise nearly $40 million in capital at an undisclosed valuation.
Visa recently launched a cross border remittance network with a pseudo-distributed ledger. This move shows their optimism that more institutions will look to gain exposure to crypto, as reported .International payments are often routed through several intermediaries who end up taking their cut and piling on fees, ultimately borne by the end users of the banks.
Other than the monetary inefficiency, it can take days, sometimes weeks, for a transaction to reflect in a receiver’s account. This system has been recognized as flawed and inefficient, but the stubborn nature of bankers and governments meant that nothing would be done as long as the banks profit and help the economy grow.
Although Visa is indeed a household intermediary in the payment’s world, it is less guilty than other contenders considering the speed and efficiency of their card-based networks.
Institutional Custody on the Rise
Visa and Anchorage are both members of the Libra consortium, Facebook’s controversial crypto project. Anchorage’s role in Libra will most likely be with the Calibra wallet as it is going to be rolled out as a payment method, drawing in the use of secure, self-custodial software.
An interesting aspect of Facebook Libra is their plan to take users’ deposits and to deposit them into a basket of fiat holdings. Presumably, the goal here is to reward Libra Investment Token holders with dividends from the interest in these holdings. At least with DAI, a stablecoin from Ethereum, it is possible for an end user to join a rewards pool with a chance of winning.
Furthermore, holding a basket of fiat would put Facebook at risk for inflationary pressures on the various currencies. Unless an exchange rate mechanic comes into play between Libra tokens and the different fiat tokens, Facebook Libra would be at risk for price changes on the fiat currencies. As we have seen in places like Venezuela, this can be a significant risk. There are already many real-world pressures on fiat currencies right now.
This marks Visa’s second investment in a cryptocurrency startup after their round in Chain almost four years ago.
Anchorage was relatively less known until it appeared alongside banking stalwarts like Mastercard, Visa, and PayPal in the group of companies that are forming the Libra consortium.
Terry Angelos, Visa’s head of fintech, said Visa is interested in supporting companies like Anchorage that are helping to build the necessary infrastructure to the growing ecosystem of digital assets. In his opinion, Anchorage is building a foundation to support the new age of financial services.
Diogo Monica, a co-founder of Anchorage, stated that they have been working with Facebook to help design the technical layout of Libra since day one. Monica and his co-founder Nathan McCauley have known each other since they both worked in the fintech department of Square.
Custody has become a popular game these days with Coinbase and BitGo raking in most of the big money. Newer firms like Anchorage will have to separate themselves with something unique to stand a chance in draining business from these more substantial brands.
Anchorage’s product offers an alternative to traditional cold storage and private key management, where investors are required to record their private key to access their coins physically.
Anchorage uses biometric software along with several layers of human approval to secure holdings. The advantage of this model, according to the company, is an investor’s ability to have better control and easier access to their holdings, making active participation in networks much simpler without the risks of a hot wallet.
Bart Stephens, a managing partner at Blockchain Capital, called it the most compelling product demonstration he’s seen in the last seven years.