Custody Evaluation of Kraken Custody, Anchorage Digital and Zodia Custody
Table of Contents
- 1. Executive Summary
- Recommendation
- 2. Evaluation Framework
- 3. Custodian Summary Assessment
- 4. Kraken Custody
- 5. Anchorage Digital
- 6. Zodia Custody
- Appendix: Overview of Custody Technologies
1. Executive Summary
Ethena requires custodial partners capable of safeguarding and servicing a complex, multi-asset backing portfolio valued at $6.46B (Jan 5, 2026).
The portfolio is composed primarily of Liquid Stablecoins (~63%), with additional exposure to BTC (~23%), ETH & ETH LSTs (~12%), and small balances of BNB, XRP, and SOL.
For the purpose of this evaluation, Kraken Custody, Anchorage Digital, and Zodia Custody are assessed solely as custodians of backing assets - specifically USDT, USDC, PYUSD, USDtb, and Aave aTokens - and not as Off-Exchange Settlement (OES) providers used to collateralize perpetual positions on centralized exchanges. Ethena currently relies exclusively on Ceffu and Copper for OES functionality.
Supporting Ethena’s backing assets at this scale requires custody providers with:
- Hardened MPC/HSM-based key-control frameworks
- Fully auditable proof-of-ownership and segregation
- Bankruptcy-remote legal structures
- Strong controls preventing unauthorized smart-contract interactions
- DeFi-compatible custody workflows (e.g. allowlisting for protocol interactions)
- Multi-jurisdictional regulatory coverage
- High operational resilience and incident response
Kraken Custody, Anchorage Digital, and Zodia Custody all meet baseline institutional custody requirements. They differ, however, in regulatory perimeter, geographic strategy, and operational design, making them complementary rather than substitutable.
Custodian positioning (custody-only):
Kraken Custody
U.S.-centric custody provider operating under a Wyoming SPDI bank framework.
Conservative, cold-first custody model suited for stablecoin-heavy and long-duration reserve assets.
Workflow-based policy controls with strong legal segregation.
Anchorage Digital
Strongest U.S. regulatory posture, holding the first federal crypto trust bank charter.
Advanced hardware-enforced policy engines and biometric multi-party authentication.
Well suited for assets requiring tighter operational controls and programmable custody logic.
Zodia Custody
Strong global footprint with licenses across the UK, EU, Hong Kong, Ireland, and UAE.
Bank-backed governance model (Standard Chartered, Northern Trust, SBI, NAB, Emirates NBD).
Well suited for non-U.S. jurisdictions and institutional LP requirements.
Recommendation
Given the scale, composition, and geographic distribution of Ethena’s reserves, a multi-custodian strategy is appropriate:
- Kraken Custody – U.S.-anchored, conservative reserve custody under an SPDI framework, suited for stablecoin and long-duration reserve assets.
- Anchorage Digital – U.S. regulatory coverage with strong hardware-enforced custody controls and programmable policy enforcement.
- Zodia Custody – European, Asian, and Middle Eastern coverage, providing jurisdictional breadth and diversification of counterparty risk through bank-backed custody.
2. Evaluation Framework
2.1 Ethena’s Custody Requirements
For this proposal, Ethena’s custody requirements are scoped to the safekeeping and controlled movement of backing assets, not to exchange collateralization or OES workflows.
Key requirements include:
- Secure custody of stablecoins and DeFi receipt tokens (aTokens)
- Strong controls preventing unauthorized asset movement or smart-contract interaction
- Clear, auditable proof of ownership and balances
- Bankruptcy-remote segregation of client assets
- Regulated entity with transparent legal structure
- Ability to support DeFi interactions via allowlisted addresses
- High operational resilience and incident response coverage
The custody provider must therefore deliver:
- MPC/HSM-backed key isolation
- Programmable or workflow-based policy layers
- Regulated custody with clear asset segregation
- Secure APIs and operational pipelines
- Multi-jurisdictional licensing (where applicable)
- 24/7 operational support
2.2 Evaluation Framework
Baseline Requirements
- Hardware-based key protection (MPC / HSM)
- Segregated custody with clear legal title
- SOC 1 / SOC 2 or ISO 27001 audited controls
- Crime / cyber insurance (to disclosed limits)
- Bankruptcy-remote legal structure
- Multi-chain asset support
- Real-time or near real-time auditability
Strategic Differentiators
- Jurisdictional alignment with Ethena’s backing assets
- Ability to embed or enforce Ethena’s custody policies
- Smart-contract allowlisting and DeFi compatibility
- Ability to custody staked assets and DeFi receipts
- Financial strength and institutional backing
- Geographic coverage and redundancy
Note: Integration with trading venues or OES networks is out of scope for this assessment.
3. Custodian Summary Assessment
| Metric | Kraken Custody | Anchorage Digital | Zodia Custody |
|---|---|---|---|
| Regulatory | Wyoming SPDI (US state-regulated bank). Full-reserve custody regime. Article 8 UCC treatment. | First federally chartered crypto trust bank in the US (OCC). BitLicense (NYDFS). MAS Major Payment Institution (SG). | FCA Registered (UK). VASP (Ireland). CSSF (Luxembourg). TCSP (Hong Kong). ADGM FSRA (UAE). |
| Security Model | Cold-first custody with hardware-secured wallets. Workflow-based controls. ISO 27001 + SOC 2 Type II. | MPC + HSMs with embedded policy engines. Continuous audits. | HSM-centric custody with client-defined entitlement workflows. Continuous audits. |
| Insurance (est.) | Platform-level insurance disclosed; custody-specific coverage to be confirmed. | Industry-leading (crime & cyber). | Industry-leading (crime & cyber). |
| Key Strengths | Conservative US custody under the SPDI regime. Strong legal segregation. Well-suited for long-duration reserve assets. | Strongest US regulatory posture. Hardware-enforced policies. High-throughput institutional operations. | Bank-backed ownership structure. Strong multi-jurisdictional coverage. Institutional compliance across 15+ jurisdictions. |
| Access Efficiency | Conservative latency profile; withdrawals may take up to 24 hours. | ~90% of transactions processed within 20 minutes. | Near real-time settlement. |
| Security Features | Cold-first architecture. Address allowlisting. Designated Security Procedures and role-based access. | Biometric multi-party authentication. Behavioural analytics. Smart contract allowlisting. Policy enforcement inside HSMs. | Client-defined entitlement policies enforced in HSMs. Secure data centres. |
| Customisability | Moderate – workflow-based policies, less hardware-native. | High – hardware-native policy engines. | High – flexible role-based workflows. |
| Auditability | SOC 2 reporting; regulator and auditor access under SPDI framework. | Cryptographic proof of key existence and control. Wallet-level proof of ownership and management. | Wallet-level proof of ownership and management. |
| Accountability | Structured reporting via custody and prime infrastructure. | Structured data export via dashboard/API. | Structured data export via dashboard/API. |
| Other Services | Integrated prime, trading, and credit services (optional; custody-only for Ethena). Fiat rails. | DeFi staking and trading. Settlement services. RWA yield partnerships (e.g. OpenEden). | DeFi staking and trading. Settlement services. |
| Audits | ISO 27001 and SOC 2 Type II (custody). | SOC 1 and SOC 2 Type II. | SOC 1 Type I/II and ISO 27001. |
| Notable Clients | Institutional clients undisclosed; long-standing exchange and institutional user base. | Visa, Electric Capital. | CoinShares, Invesco. |
Overall Assessment
All three custodians meet Ethena’s baseline custody requirements across security architecture, regulatory oversight, organisational controls, insurance (to varying disclosure levels), and auditability.
They differ primarily in regulatory posture, operational conservatism, and policy-enforcement model, making them complementary components of a diversified custody strategy.
Recommended Custody Allocation
Given the scale, composition, and operational requirements of Ethena’s reserves, a multi-custodian strategy is recommended:
Anchorage Digital for:
- Assets requiring strong programmable custody controls
- U.S. federal regulatory perimeter
- Advanced policy enforcement and hardware-native controls
Zodia Custody for:
- Cross-jurisdictional diversification
- Bank-backed governance and segregation
- Europe, Asia, and Middle East institutional flows
- Additional disaster-recovery and regulatory redundancy
Kraken Custody for:
- Conservative, long-duration reserve custody
- Stablecoin-heavy backing under a U.S. SPDI framework
- Strong legal segregation and full-reserve treatment
- Assets not requiring rapid redeployment
4. Kraken Custody
4.1 Security Architecture
Cold-first, hardware-secured custody operated via Kraken Financial (Wyoming SPDI). Kraken’s custody architecture prioritises asset segregation and conservative security controls over high-throughput signing.
Key characteristics:
- Cold storage as the default for reserve assets
- Hardware-secured warm/hot wallets for operational needs
- Private keys generated and stored in secure environments
- Instruction-based authorisation via Designated Security Procedures
- Withdrawal address allowlisting and role-based access controls
Security controls are validated through independent assurance rather than proprietary HSM-embedded policy engines.
Risk Strengths
- Strong segregation of client assets from Kraken balance sheet (SPDI + Article 8)
- Conservative cold-first model suitable for long-duration reserve assets
- ISO 27001 and SOC 2 Type 2 certified custody controls
- No reported loss of client funds from custodial wallets
Residual Risks
- Policy enforcement is workflow-based rather than hardware-embedded
- Less suitable for high-frequency or near-real-time settlement use cases
- Withdrawal latency (up to 24 hours) introduces operational planning constraints
4.2 Regulatory & Legal
Kraken custody is provided through Kraken Financial, a Wyoming Special Purpose Depository Institution.
Regulatory posture:
- Wyoming SPDI charter (US state-regulated bank)
- Full-reserve custody model; no rehypothecation
- Assets treated as client trust property, held off-balance sheet
- Custodied digital assets designated as Article 8 financial assets, with clients as entitlement holders
Legal structure:
Clients retain beneficial ownership of all custodied assets. Assets are bankruptcy-remote and not treated as deposits. While this framework is strong within the US, it is state-based rather than federal and does not confer FDIC/SIPC protection.
4.3 Operational Performance
Kraken’s custody model is intentionally conservative and optimised for security rather than speed.
- Withdrawal initiation may take up to 24 hours under the custody agreement
- Additional delays may arise from blockchain conditions or compliance checks
- Address-level controls require pre-approved, client-owned destination wallets
This operational profile is appropriate for reserve custody but not for assets requiring rapid redeployment or frequent settlement.
4.4 Fit for Ethena Backing Assets
| Asset Class | Fit | Rationale |
|---|---|---|
| BTC | Good | Strong cold custody and legal segregation for long-duration holdings |
| ETH / LSTs | Acceptable | Custody suitable, but limited native policy enforcement for staking / DeFi flows |
| Liquid Stables | Good | Well-suited for USDC, USDT, PYUSD reserve custody under SPDI regime |
| SOL | Acceptable | Supported, though not a primary focus |
| DeFi Receipts (aTokens, USDtb) | To be confirmed | Requires explicit written confirmation of custody support |
Summary:
Kraken Custody provides a conservative, U.S.-anchored custody option focused on legal segregation and security rather than speed. It is suited for stablecoin-heavy reserve assets and long-duration holdings, complementing Anchorage’s high-velocity workflows and Zodia’s multi-jurisdictional coverage within a diversified custody strategy.
5. Anchorage Digital
5.1 Security Architecture
HSM-centric custody with embedded policy engines: Anchorage uses FIPS-140-2 certified hardware security modules, operating in an air-gapped environment.
Key advantages:
- Private keys never leave HSMs
- Hardware-enforced policy engines (quorum rules, contract allowlists, transfer limits)
- Biometric multi-party authentication (voice, video)
- Real-time behavioural anomaly detection
This model is good for high-throughput institutional operations.
Risk Strengths
- Eliminates single point of failure
- Low operational friction compared to legacy cold storage
- Supports near real-time signing
- Hardware-to-hardware validation meaning infrastructure compromise cannot move assets
Residual Risks
- High reliance on Anchorage’s proprietary firmware
- Concentration in one US regulatory regime
5.2 Regulatory & Legal
Anchorage Digital Bank, NA possesses:
- OCC federal trust bank charter (US)
- NYDFS BitLicense
- MAS Major Payment Institution (SG)
Legal structure: Clients have direct, exclusive title to assets, held off-balance sheet within a trust bank framework. This is the strongest legal protection available for digital asset custody in the US.
5.3 Operational Performance
- 90% of transactions settle within 20 minutes
- One of the fastest institutional custody pipelines globally
- Proven connectivity to major CEX venues (Binance, Bybit, OKX, Deribit)
5.4 Fit for Ethena Backing Assets
| Asset Class | Fit | Rationale |
|---|---|---|
| BTC | Good | Strongest security model and fast settlement |
| ETH/LSTs | Good | Contract allowlisting and staking governance |
| Liquid Stables | Good | Strong US regulatory posture for stable crypto |
| SOL | Acceptable | Supported but not primary focus |
| Other | Good | Multi-chain support |
6. Zodia Custody
6.1 Security Architecture
Zodia uses:
- Bank-grade HSM infrastructure
- Offline private key generation & storage
- Client-defined entitlement workflows
- Cryptographically enforced policies within secure data centers
Compared to Anchorage:
- Less focus on biometric multi-party authentication
- Focuses more on bank-style governance and segregation
- Similar HSM-based isolation without MPC
6.2 Regulatory & Legal
Zodia is licensed across:
- UK FCA (MLR)
- Ireland VASP
- Luxembourg CSSF
- Hong Kong TCSP
- UAE ADGM FSRA
Backed by global banks:
- Standard Chartered
- Northern Trust
- SBI
- NAB
- Emirates NBD
Legal structure: Assets held under safeguarding and segregation regimes aligned with MiCA and emerging UK frameworks.
6.3 Operational Performance
- Near real-time settlement workflow
- Strong enterprise entitlement system
- Heavy focus on control and governance rather than raw speed
6.4 Fit for Ethena Backing Assets
| Asset Class | Fit | Rationale |
|---|---|---|
| BTC | Good | Strong governance, slower but secure |
| ETH/LSTs | Acceptable | Supports staking flows, but allowlisting not as mature |
| Liquid Stables | Good | Ideal for global institutional customers |
| SOL | Good | Supported |
| Other | Good | Full multi-chain roadmap |
Appendix: Overview of Custody Technologies
| Feature | Cold Storage | Multi-Party Computation (MPC) | Multi Signature | Hardware Security Module (HSM) |
|---|---|---|---|---|
| Mechanism | Keep private keys disconnected from any network. | A single key is split into shares. The key is never reassembled. | Multiple independent keys are required to sign. | A tamper-proof device signs transactions internally. Keys never leave. |
| Security | Very High (against online threats). Vulnerable to physical theft/loss. | Very High. Eliminates single point of failure. | High. Eliminates single point of failure. | Very High. Protects against physical tampering and software attacks. |
| Flexibility | Very Low. Designed to be difficult to access. | High. Policies and signers (shares) can be changed quickly off-chain. | Low. Changing signers is a slow, on-chain process (requires moving funds). | High. It’s a high-performance tool that can be part of any policy. |
| Operational Speed | Very Slow. Access is a manual, high-friction process. | Fast. Can be automated for “warm” wallet operations. | Slow. Requires coordinating multiple independent signers. | Very Fast. Designed for high throughput (thousands of signatures/sec). |
| On-Chain Footprint | N/A (Storage strategy) | Stealthy. Looks like a standard, single-signature transaction. | Transparent. All signers and the M-of-N rule are visible on-chain. | N/A (Hardware component) |
| Blockchain Support | Universal | Universal | Limited. Not all blockchains natively support multisig smart contracts. | Universal |
| Transaction Cost | N/A | Low. (Standard transaction fee) | High. Requires more data on-chain, leading to higher network fees. | N/A |
| Best For | Securing the strategic reserve (90%+ of assets). | Flexible, high-security “warm” wallets for institutional operations. | Simple, transparent shared ownership (e.g., a board of directors). | The secure “vault” for all private keys/shares in any setup. |