Anchorage founder Diogo Monica: Anything short of excellence is a threat to the industry

Born in California and raised in Portugal, Diogo Monica is the co-founder and president of Anchorage. Anchorage brings the world’s most advanced and proven security architecture to cryptocurrency custody, to deliver the services institutions expect from a traditional custodian. In this interview he looks back at his journey into crypto and why the industry should resist the temptation to "ask for forgiveness, not permission."

How did you first get into blockchain and the decentralized web?

In my prior life as an academic, I published several papers on distributed systems and information security, including a paper on proof of work in 2009; worked on zero-knowledge proofs; and authored patents in secure communications, encrypted hardware, and payment systems. But it wasn’t until 2013 that I first heard about Bitcoin, and saw that my academic work could have new and meaningful real-world applications.

When did you set up your company?

The seeds of Anchorage were first planted in 2011, when I joined a small fintech company called Square, which is where I met my now co-founder, Nathan McCauley. Together we developed Square’s security infrastructure, which is now used to move over $80B in annualized volume. At Square, our first project was designing and manufacturing Square's encrypted card reader, and it's been rewarding to see it being used by merchants ever since.

Security is important to every company, and while we were proud of what we’d built at Square, Nathan and I knew that we wanted to work on security infrastructure that could be used by many different companies, not just embedded into one company’s platform. In 2015, we decided to lead security at Docker, where we worked on the security foundations of the container and orchestration subsystems that are now used as core building blocks of modern IT infrastructure worldwide.

The infrastructure we helped to build at Docker is now in use across Amazon Web Services, Google Cloud, Microsoft Azure, and top banks and governments around the world. Our experience at Docker prepared us to meet the challenge of building a new type of security infrastructure from the ground up. 

As crypto-mania hit the mainstream in 2017, investor friends in the space were clamoring for help with custody and security. With my and Nathan’s combined expertise in security engineering, cryptography, and distributed systems, we set out to create Anchorage, the first crypto-native custodian for institutional investors. 

What need does it serve?

Crypto has attracted a growing number of institutional investors, ranging from venture capital funds to hedge funds to family offices, and these institutions need a third-party custodian to hold their assets securely. 

But institutional investors’ needs don’t stop at safekeeping: they also need their custodian to help them use their assets on demand. The Anchorage approach to custody not only provides a higher standard of security, but also enables clients to use their keys for transactions, audits, staking, voting, delegation, and more, in real-time and without ever being removed from safe storage.

Have you launched other companies before? What were they?

Anchorage is the first company I’ve founded. I’d entertained other ideas before, but this is the first time where the market need was so acute, and my expertise was so directly applicable to building the solution needed. It often feels like I spent my entire career unknowingly preparing to found Anchorage. 

What have been the biggest challenges you’ve faced in building a business in this space?

Building a compliant business in an uncertain regulatory environment. We have a deep commitment to regulatory compliance at Anchorage, and in many ways, our solution was created to better help our institutional clients comply with federal guidelines. We are proud that Anchorage Trust Company is a Qualified Custodian since that’s a hard requirement for many Registered Investment Advisors. U.S. regulators have been working with the private sector in good faith to develop a productive regulatory framework around digital assets, but there is still considerable uncertainty across the ecosystem.  

What’s the best piece of advice you were given when it comes to being an entrepreneur in this space?

While there’s a lot of money and a lot of ideas to go around in the technology space, finding a team you can truly rely on is rare. That advice has been extremely important to me, which is why I recruited some of the best people I’ve ever worked with to join Anchorage, and why my partnership with Nathan has continued from company to company. 

What advice would you give to someone setting up a business in the decentralized web?

Many startups are founded with an ethos of “ask for forgiveness, not permission.” The stakes in crypto are too high for that kind of approach: to succeed in this space, you need responsibility, integrity, thoughtfulness, and extreme dedication to compliance. Finance is a rigorously regulated industry, and anything short of excellence when it comes to regulatory compliance is not only an existential threat to any new venture, but a setback for the industry as a whole.

If you built your business all over again, what would you do differently?

I’d try to build today’s team six months earlier. Like any startup dealing with rapid growth and strong customer demand, we have big ambitions in terms of what we want to build, and the biggest constraint we face is time.

What project or projects are you most excited about (that aren’t yours!)

I’m excited about the range of approaches being taken with stablecoins, specifically Maker/Dai and Libra. Stable currency is a powerful use case for crypto, and these two projects are fascinating both for their technical features and for their potential to achieve widespread adoption.

What is (or what will be) blockchain’s ‘killer app’

Right now I’d say DeFi borrowing and lending. At Anchorage, we believe that blockchain will become foundational to the world economy, and has the potential to open up the global financial system to billions of people who lack access today.

DeFi is accessible, open, permissionless, and inclusive, and almost everyone on earth can participate without needing a bank account. That means access to a global payments network, credit, savings, and stores of value that are safe from the volatility of unstable or inflationary fiat currencies.