Anchorage adds Arbitrum support as institutions eye L2s

Crypto custodian Anchorage Digital has introduced support for Arbitrum, the largest layer 2 blockchain on Ethereum.

Backed by Visa and Goldman Sachs, Anchorage serves institutional clients such as venture capital firms and asset managers. Its support for Arbitrum includes custody of Arbitrum-based Ether, USDC, and ARB, as well as forthcoming “governance support.”

Anchorage is one of several crypto custodians that hold Arbitrum-based tokens, according to Steven Goldfeder, one of the blockchain’s co-founders.

“You’ll always have the core group of crypto-versed people that always figure things out, but that’s not where our vision ends,” he told DL News.

“Our vision ends at the masses generally, and having a variety of [custodians] that work for retail and institutional, I think, are very important.”

Institutional interest

Institutional interest in crypto has surged this year, with the approval of the first spot Bitcoin ETFs and BlackRock’s launch of BUIDL, a tokenised money market fund.

Ethereum developers are betting that the most practical road to mass adoption runs through layer 2 blockchains like Arbitrum.

Ethereum is often congested and expensive — the cost of running a truly decentralised network, according to proponents.

Cheaper and faster layer 2 blockchains are something of a workaround, processing and batching transactions before appending them to Ethereum. They now handle almost twice as many transactions as Ethereum itself.

Newly-issued tokens

Arbitrum accounts for more than 43% of crypto on all layer 2 blockchains, according to L2BEAT. Its $3.1 billion DeFi ecosystem is more than twice the size of its next-largest competitor, Blast, according to data from DefiLlama.

Last year, Arbitrum developer Offchain Labs announced it would cede control of the blockchain to its “community” by sending its developers, investors, and longtime users newly-issued tokens called ARB, which function much like shares in a traditional company.

Those people — and anyone who buys ARB on secondary markets — now control the Arbitrum DAO, a digital cooperative with the sole ability to make changes to the protocol.

Anchorage will soon offer support to clients that want to participate in Arbitrum governance. CEO and co-founder Nathan McCauley declined to provide an exact date for the rollout, but said it is part of a growing trend.

“Today, many institutions are interested in accessing leading layer 2s like Arbitrum,” he told DL News through a spokesperson.

Crypto-native companies such as crypto VCs are the most likely to take an interest in crypto governance, according to McCauley.

But it’s just a smaller part of a broader institutional push into the asset class.

“Institutions are increasingly interested in more active participation in the full range of blockchain activity—from staking to on-chain governance and voting,” he told DL News through a spokesperson.

“We are also seeing rising demand from registered investment advisors (RIAs), who increasingly want to offer regulated crypto to their end clients.”

Aleks gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.