Yahoo Finance’s Alexis Christoforous and Dan Roberts discuss the crypto banking space with Anchorage President Diogo Monica.

Video Transcript

ALEXIS CHRISTOFOROUS: Another milestone for cryptocurrencies, the crypto custodian Anchorage has secured conditional approval for a national bank charter from the federal government, making it the first national digital asset bank in the US. Joining me now is the president of Anchorage, Diogo Monica. We're also joined by Yahoo Finance's Dan Roberts, who we know covers, among other things, the crypto space.

Diogo, good to have you with us, and congratulations on receiving this federal bank charter. Tell us what this means not only for your company, but for the crypto space.

DIOGO MONICA: Absolutely. Thank you for having me. As of Wednesday, there was no company in crypto that had both the technology needed to do digital asset custody and the clear regulatory guidelines that allowed these institutions that were leaving themselves on the sidelines to participate in this space. So Anchorage is a regulated digital asset platform.

We allow these institutions to build products in crypto. We give them services and infrastructure that allows them to trade custody, lend, borrow, and participate in other block chain activities. And so this is really big for the space because it allows very large institutions, neobanks, large bulge bracket banks, and maybe smaller companies to now have a trusted partner with a very clear regulatory charter and very clear guidance on digital asset custody, stablecoin issuance, and other businesses within crypto.

DAN ROBERTS: Diogo, Dan Roberts here. We're hearing a lot about institutions, and obviously, Anchorage started out by being a custodian for institutions. And the bitcoin run we've seen in the last few months has really been driven by Wall Street and institutions getting in. I guess if we zoom out a bit, I'd ask you, what will it take to really bring retail investors, regular folks in here?

I mean, in the 2017 round, we obviously had a lot of regular people buying up tokens because there was a frenzy. And then a lot of them kind of lost their shirts, if told, when it crashed a little bigger than Bitcoin did in February of 2018. What's different this time, and how do we get to the point where a regular person who has a lot of doubts and maybe doesn't understand crypto would actually get in and use a crypto bank?

DIOGO MONICA: Well, I will point out that as of a few weeks ago, everyone that has ever bought bitcoin and held made money. So that is a very interesting statistic for us to remember. What I would say, though, is that you're absolutely right in that the rally in 2017 was primarily motivated by retail. This time around, we're seeing something completely different.

Anchorage sits in a very interesting space in the ecosystem since we're trusted by hundreds of institutions that move billions of dollars to our platform. And so this year, what we've seen is that with the news of PayPal coming to this space and with Square already being in the space, companies like Square and MicroStrategy taking positions on their Treasury explicitly for capital preservation.

This is validation of the thesis of bitcoin as a store of value. They are not going to be the last companies that are buying into bitcoin, and there's a lot of other companies that are following suit. So this rally is absolutely followed and made by the institutions, which, obviously, have more tolerance for volatility in our professional investors. So less about following any fad and more about a long-term bet in the asset class.

DAN ROBERTS: And Diogo, I'm so glad that you mentioned Square and PayPal. You guys are backed by Visa. And I've written a little bit about how with all the attention on Square and PayPal, it has been arguably a little bit quieter. But Visa has taken a number of kind of crypto-friendly steps, including approving some bitcoin rewards, credit cards, and debit cards Visa-branded.

What will it mean when companies like that kind of get more public and loud about their involvement in the space? What will the role for big incumbents like Visa be in the crypto space moving forward?

DIOGO MONICA: Our goal with Anchorage was always to allow institutions to build products in crypto. Visa, as you mentioned, is a perfect example. They're clients of Anchorage and investors in Anchorage, and they're building products that allow the mass audience to access crypto and the very easily usable way that they access the current products that they have access to.

So this is incredibly important because, as you mentioned, these are going to be the things are going to drive mass consumer adoption. And what Anchorage is doing, and the really exciting news around being the first federally chartered digital bank, is that now there's clear regulatory strategy for institutions like Visa, but all these other neobanks and challenger banks that want to follow PayPal's footsteps, Square's footsteps, that see that the millennials have affinity towards cryptocurrencies, and that it's not an if, but when they have to add this to their product lines and crypto alongside equities.

ALEXIS CHRISTOFOROUS: Diogo, having this federal charter now, what does this do to your ability to offer different kinds of financial products as you, I would imagine, see demand for a wide range of services increase now that this has happened?

DIOGO MONICA: Yes, this gives us fiduciary abilities. And we are at the same level as all these other national banks. And so there's a lot of businesses that Anchorage does outside of just custody. Anchorage has financing. Not only institutions can get US dollar loans backed by bitcoin collateral, but they can also lend out their bitcoin, put it in asset pools, and generate interest out of those loans.

So these are a whole set of services that are more to the prime service of the house more than the technology side of the house that are offered by Anchorage today and that we'll continue to expand now that we have this charter. I think the most important thing is that we're seeing all of these bulge brackets and these neo challenger banks wanting to come in the space, but they were hesitating because they did not believe that the current regulatory structure worked for them.

And now that finally the OCC has approved the first national bank, now they feel a lot more confident. And I can tell you that it's been a whirlwind of 48 hours in terms of emails and in terms of reach out and sign ups.

DAN ROBERTS: Diogo, let's end on this. Obviously, for our viewers at Yahoo Finance, they're interested primarily in the price of these assets. It's been a wild ride in the last six to eight months, not just for Bitcoin, but also Ether and a number of other tokens.

You mentioned that institutions, obviously, are going to have a higher appetite for the volatility. But for regular retail investors, what do you think they can expect with price overall in the next few months? And what do you say to people who think it's a clear bubble?

DIOGO MONICA: Yeah, what I would say is that our focus is not whether the prices are going up or down. Our focus has always been in making sure that the prices are right. That's ultimately what institutions care about before they come into crypto. There were three primary issues that institutions had that were holding them back.

One was safety, which was solved with our crypto technology. The second one was liquidity, which we've solved by sourcing liquidity from many OTC providers in the US on our platform for brokerage. And the third one was regulatory clarity. All these things will make sure that price discovery is more efficient. And so that's ultimately what matters.

Over the long run, of course, we're big believers in crypto. Over the short run, I think the things that we need is for institutions to be confident that this is a right place to come in, that they're institutions that can actually provide them the same services that they can get in traditional market with the same level of regulatory scrutiny.

ALEXIS CHRISTOFOROUS: All right. As you say, another bit of validation for cryptocurrencies. Diogo Monica, president of Anchorage, thanks so much for being with us.

DIOGO MONICA: Thank you for having me.