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Hi readers,
In today’s newsletter, Nathan McCauley of Anchorage Digital discusses the renewed interest in digital assets from banks and answers the question: What should banks be considering as they dive back into digital assets?
Then, Aaron Brogan of Brogan Law and Matt Homer of The Venture Dept showcase how private-market fundraising shuts 80% of American households out of startup investing, and offer a solution for how this can be changed.
What Banks Should Consider Before Diving Back Into Digital Assets
2025 will be the year banks jump back into digital assets, reversing years of caution due to a challenging regulatory and market environment. Following the withdrawal of SAB 121 and new guidance from a key federal banking regulator, banks are now back in the race to develop crypto strategies to service their clients and stay competitive.
What we are seeing now is renewed interest from banks across the board — from credit unions and community banks to midsize and regional players to Wall Street giants. What is at stake for banks are existing and prospective client relationships as they compete for market share among retail and institutional participants looking to engage in digital assets. Banks that lead the way will be able to differentiate their products and create capital-efficient revenue streams.
For reasons both cultural and technological, many banks may end up either licensing custody solutions to use in-house, or partnering with a crypto-native sub-custodian. One of the most important decisions a bank has to make is who they choose as a custody partner — a critical question as cybersecurity incidents continue to draw headlines.
From security and regulatory status to time-to-market, what should banks be considering as they dive back into digital assets?
Time-to-market and regulatory status
One of the first things any bank should consider is how their approach will impact time-to-market strategy and competitive positioning. For banks, working with a regulated custodian is more than just a box-checking exercise.
Partnering with a crypto custodian that has built a comprehensive risk management and compliance infrastructure — from AML and KYC controls to information security policies — can give banks a streamlined go-to-market strategy. Banks and their crypto partners should not only speak the same language, but be regulated on the same footing.
Crypto partners need to demonstrate that they meet — and exceed — bank regulatory expectations. Doing so can help to get regulators and senior bank leadership on board, in addition to creating peace-of-mind among clients.
Safety and resiliency
Banks getting into crypto want to do so quickly, but also safely in order to maintain the hard-earned trust of their clients. That is why banks often put security front-and-center in the search for a crypto custodian.
As a baseline, any crypto custody partner should take an end-to-end approach to security, involving multiple lines of defense for every transaction. The custody partner should also have in place robust technology to help ensure every transaction reflects client intent. Keeping assets legally separated from those of other clients and the firm can help to mitigate risk.
Finally, custody solutions should meet the stringent operational resiliency standards that banks are held to, so they can scale alongside the bank’s digital asset business.
Integrated solutions
Banks should also consider ease of integration into existing systems, as well as the ability to support future product and revenue streams. Integrating crypto custody into core banking systems can help to optimize revenue opportunities, operational efficiency and time-to-market.
Secure custody is really the foundation for additional offerings — from collateralized lending to trading to staking. As banks look to meet end-client demand for full participation in the ecosystem, working with a custodian that offers an integrated suite of services is key.
This year will be a turning point for crypto adoption across traditional banks of all sizes, with crypto-native custody solutions providing a clear path for banks to stay competitive and meet client demand.
In recent weeks, President Trump has taken steps to draw investment to the United States. His proposed Gold Card would allow foreign investors to purchase legal status in the United States for $5 million. In his Joint Address to Congress, he lauded a $200 billion direct investment from Japan’s SoftBank.
While there’s nothing wrong with soliciting offshore investment, the government is missing a key source of investment at home. The accredited investor rule — which says that individuals must have a net worth of more than $1 million, or annual income exceeding $200,000 — shuts too many Americans out of our most lucrative securities markets. It’s time to change that.
In the U.S., securities broadly fall into two categories: public and private. Public securities trade freely on national exchanges and are open to all investors, but they are extremely onerous to issue. Companies are required to navigate extensive regulatory and compliance requirements to “go public.” Their alternative is to stay private, and many companies like Stripe and SpaceX are choosing to do just that.
Private markets, however, come with a catch. In exchange for easing the burden of regulation, they restrict access to accredited investors. This means that 80% of American households that do not qualify are effectively shut out. As more businesses choose to stay private, more everyday Americans are prevented from building wealth alongside them.
In the old days, public markets were the deepest and most reliable sources of capital for large, high-growth companies. This was great for the public, because it meant they had access to the best investments. Times have changed, though.
According to SEC Commissioner Hester Peirce, “The once aspirational goal of becoming a public company seems to have lost its luster.” In recent years, private markets have grown at roughly double the rate of global public equity markets.
And a single SEC rule is to blame.
The accredited investor rule
The accredited investor rule, 17 CFR § 230.501(a), is an SEC regulation that restricts access to private investments. It sets criteria investors must meet to participate in offerings like Regulation D, the primary exemption private companies use to raise capital. In effect, the rule blocks millions of Americans from investing in the most promising companies.
Advocates defend this rule openly. “Knowledge cannot protect people from potential losses… Only financial resources can,” Patrick Woodall, director of policy at Americans for Financial Reform, told The Wall Street Journal last year.
We disagree. This paternalistic view assumes the public must be “protected” from itself. But the accredited investor rule doesn’t protect the public. It locks them out from investing in companies shaping the future like OpenAI, Anthropic and Perplexity.
A test-in policy has clear advantages. First, it’s fair. Any American who passes can invest. Second, broader access to private markets lets more Americans share in the country’s economic success. If we’re building here, everyone should be able to buy in. Third, expanding private markets makes them more useful.
But Sen. Scott’s bill is unnecessary — a test-in accredited investor rule doesn’t require new legislation. The SEC already has the power to implement it through Sec. 2(a)(15) of the Securities Act of 1933. Because of this, an amendment to the rule on these grounds is unlikely to encounter significant legal resistance. By amending the accredited investor rule, the SEC can reshape private markets through rulemaking alone. It should start tomorrow.
