Chainlink launches CustodySync, enabling institutional clients to use custodied assets as DeFi lending collateral without moving custody.
DeFi & Yields ·
Chainlink introduced CustodySync, a system that enables qualified custodians to allow institutional clients to use assets held in custody as collateral for DeFi lending without transferring those assets out of custody arrangements. Anchorage Digital is the launch partner for the solution, operating through its Atlas Collateral Management product and Anchorage Digital Bank infrastructure.
The solution addresses a long-standing barrier between institutional capital and DeFi. Chainlink identified approximately $700 billion in digital assets under custody and noted that DeFi lending markets hold over $80 billion in deposits. Institutional clients typically require assets to remain with qualified custodians due to regulatory mandates and security policies, yet accessing DeFi required moving assets out of custody—a conflict that kept this capital largely isolated from onchain lending opportunities. CustodySync synchronizes custodian systems and lending protocols throughout a loan's lifecycle, from deposit through liquidation, using Chainlink to deliver verified data to both parties.
The mechanics rely on keeping the custodian's collateral management system and the DeFi protocol operating on aligned data to prevent synchronization failures that could trigger incorrect liquidations or margin calls. Whether this connection will materially increase institutional participation in DeFi lending remains to be seen, though the solution removes a previously insurmountable operational constraint.