Anchorage Digital CEO Highlights 'Widespread' Self-Custody Risks After Prime Trust Bankruptcy
The collapse of crypto custodian Prime Trust in recent months has underscored the inherent risks of self-custody within the cryptocurrency industry, according to Diogo Monica, CEO of San Francisco-based crypto bank Anchorage Digital.
Speaking in an interview with crypto news outlet Decrypt, Monica emphasized that Prime Trust's failure wasn't due to the technology they used to safeguard digital assets but rather their inability to effectively utilize it.
He described it as an "integration failure" and highlighted that the company lacked the technical expertise necessary for its core mission of asset custody.
The critical issue, dubbed the "Wallet Incident" in a court filing by Prime Trust's CEO Richard Lai, revolved around Prime Trust continuing to store tokens in an old wallet despite acquiring a new solution from digital asset security platform Fireblocks.
This led to a situation where millions in assets became inaccessible, he said.
In addition to custody problems, Prime Trust also mishandled client funds through risky investments, further compounding its issues.
According to Monica, Prime Trust's case reveals a broader problem in the crypto custody industry.
He pointed out that there has been a shortage of qualified custodians for years, which has pushed many to opt for self-custody.
While regulators have begun to address shortage of custodians by proposing rules requiring investment advisers to use qualified custodians for digital assets, Monica stressed that existing custodian rules from traditional finance could provide a solid framework for protecting client funds in the cryptocurrency space.
Anchorage is the first company to have become a federally chartered crypto bank in the US, and the firm has called for clear
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