Eight Questions: Diogo Mónica, Co-Founder and President, Anchorage Digital

Welcome to Eight Questions, where we profile individual members of the Anchorage Digital team, diving into their career paths, what brought them to crypto, and what makes them tick. Why eight? Because it’s the number of decimal places a bitcoin can be divided into. It’s also the last single digit number in a Fibonacci Sequence, and we like that.

In honor of the company’s six year anniversary this month, this installment of our Eight Questions series features Diogo Mónica, Co-Founder and President of Anchorage Digital. As an early employee at then-startup Square, Diogo met his Anchorage Digital co-founder Nathan McCauley, Diogo also broke new ground toward the future of payment systems — holding the patent for the Square card reader alongside Jack Dorsey. Together Nathan and Diogo then worked at Docker, where they helped secure core infrastructure that runs on over half of the internet and is used by global banks, governments, and the three largest cloud providers. Diogo is also a passionate venture capitalist with a portfolio of over 100 startups, focusing on companies that are building Web3, and holds a Ph.D. in computer science from the Technical University of Lisbon.

1. You and Nathan first met while working at Square, and then both worked together at Docker before founding Anchorage Digital. Is there one thing about Nathan in particular – or your relationship – that helped you identify him as someone you could found a company with? 

Well if I really had to pick one thing, it might be the fact that both of us wanted to start a company. But that’s the easy part — the hard part is finding someone who you trust completely and who you are prepared to work with for decades to achieve your goals.

Nathan and I were lucky enough to be brought together when we both started at Square the same week in 2011, and as our friendship progressed over third-wave coffee at Sightglass, it became clear that Nathan was someone I could work with over the long run.

2. As Anchorage Digital has grown over the last 6 years, what have been some of the most interesting scaling challenges you have faced as a co-founder?

The Anchorage Digital business model ultimately requires that institutions trust us to hold billions of dollars in digital assets safely, and before we had a successful track record, we were two security engineers with a slide deck. Luckily, Nathan and I had the right knowledge and were in the right space at the right time. We just had to lean on our own backgrounds. 

We highlighted that we were the “perfect founder market fit” — two security engineers that had worked together for years at successful companies and now were starting our own business in the field that was a perfect venn diagram of our skill sets. Today, we don’t really have to focus on our backgrounds as founders so much, as we’ve hired incredibly talented teammates and proven our technology to some of the biggest institutions in the world and to extremely stringent regulators with success. Now, our investors and clients can speak for our work, having trusted us and what we’re doing. 

The other big one that comes to mind is regulation. Making sure we are at the forefront of regulatory compliance has been important to us since the beginning, but as we’ve grown, we’ve had to make sure that scaling our compliance and legal organization to keep up with the rest of our company was at the forefront of our priorities. Today, almost half of the company is in compliance or touches compliance work regularly.

3. Are there any particular lessons you’ve learned over the last six years that you believe will only become more applicable as we head into the future as a company?

Since the beginning of Anchorage Digital, we’ve believed in applying the same time-tested standards of the traditional financial ecosystem to the digital asset ecosystem. As we head into the future, I think this will only become more applicable and widespread. Things like the separation of custody and exchange functions seem obvious at this point when we’re thinking about the traditional financial ecosystem. Right now to many people, they're less obvious when it comes to crypto, that doesn’t mean they’re less important.

The crypto industry needs the same type of separations and standards as we have in traditional finance to promote a fairer market structure and I think this is something more people will be paying attention to as the industry matures.

4. Historically, Anchorage Digital has grown and expanded offerings in response to client demand. As you look towards the future, are there any particular areas you anticipate demand will continue to grow?

We’ve been doing custody since the beginning, and I think right now the demand in particular for secure, qualified custody will continue to grow. After a year of volatility, we are seeing  a “flight to safety,” with institutions looking to move their assets into more secure custody and in particular to places where they have greater control of their assets. After the events of FTX in particular, they want to be sure there are no risks of commingling assets and that their assets are always available to them.

This goes hand in hand with the increase of registered investment advisers (RIAs) wanting to work with qualified custodians. For RIAs, access to crypto is a competitive advantage, but a recent proposed change to the SEC’s custody rule would require RIAs to custody digital assets with a qualified custodian. I imagine there will be a significant increase in interest in qualified custodians acting either as the primary custodian or as a specialized sub-custodian for RIAs.

Taking a step back, right now we are seeing the rift between DeFi and regulated institutions continue to grow, so the demand for building bridges between the two is only going to follow suit.

5. As we highlighted in a recent blog post, one example of this is staking. Do you have any thoughts on why it has increasingly become a major area of interest for institutions?

I think they’re interested in participating more actively in the ecosystem and collecting rewards for their participation. One of the really cool things about crypto is the opportunity to support protocols by participating in the consensus, but this hasn’t always been possible for institutions to do while maintaining their secure custody of assets. As the only federally chartered bank explicitly authorized to offer staking, Anchorage Digital Bank has been able to fill that void, allowing them to stake directly from qualified custody.

On doing more with assets you already hold…. I think you’d be hard pressed to find a person that objects.

6. In many of our other Eight Questions blogs, responses have highlighted the hands-on and cross-team collaborative culture at Anchorage Digital. How did you and Nathan work to foster this kind of environment or did this happen naturally?

We made a very conscious choice, and it’s one that we’ve worked hard to scale as the  company has grown.

With our first few hires, we focused on making sure that we were building a transparent, warm culture filled with people that shared our vision. In the early days it was easy to do that. Nathan and I interviewed every candidate ourselves, got to explain our vision of the company and environment to them, and evaluate if we thought they were a good fit. Sometimes, we went so far as to have candidates interview each other and submit feedback on fit.

As our numbers have grown far beyond “a few,” scaling this has definitely been a challenge, but we’ve got a great team to help us do it, and Nathan and I still stay as involved as possible, even continuing to interview many candidates ourselves. We like to call our team a village, but we do that because we really think of it that way—we’re in it together to grow this company.

7. You recently relocated full time to Portugal after many years in the United States. Is there one thing in particular you’ve looked forward to with your homecoming?

There’s two things: the food and the tech scene. I don’t think the food one is all that surprising, but some people are surprised when I say the tech scene. Portugal has great infrastructure to support a growing startup culture, a solid talent base, and a culture of innovation.

I’m also really looking forward to working with the Anchorage Digital team on the ground here more — over 20% of our team is based in Portugal and getting face time with them helps build our company culture around the globe while executing faster on our vision.

8. If you could go back to the early days of Anchorage Digital, what’s one piece of advice you’d give to yourself (or to founders in a similar position)?

Pick one core problem to solve, and solve it. Solve it elegantly and to the full extent you can before you begin to approach others.

That’s what we did with Anchorage Digital and solving for custody, and it’s been foundational in everything we do. We stayed focused first on building the strong custody foundation and built our business and client base around that offering, and then began to explore other problems. From there we began to expand our offerings in response to client demand, but remained focused on ensuring our core product was the best it could be while adding in building out services for both new and existing clients.