Chainlink launches CustodySync to connect nearly $700 billion in custodied assets to DeFi lending markets
Key Facts
Chainlink announced on October 26, 2026, the launch of CustodySync, a service that allows eligible custodians to connect their institutional clients’ assets to DeFi lending markets while keeping them in custody. The company said the service enables institutions to borrow against those assets without moving them into the onchain market. The launch is in partnership with Anchorage Digital Bank, N.A., which provides its custody infrastructure and Atlas Collateral Management product to coordinate collateral tasks as the designated collateral agent. The mechanism puts the custodian at the center of the loan cycle, from monitoring collateral to handling liquidation procedures. Anchorage’s CEO and co-founder said institutions “should not have to choose between qualified custody and onchain liquidity.”
CustodySync works by keeping the collateral balance with the custodian and then publishing proof of reserve onchain. A transfer-restricted receipt token is then issued, representing the assets held by the custodian and used in the lending market. Chainlink says the token does not give its holder a claim on assets outside the integration. This arrangement allows the token to represent collateral in the market without the underlying assets leaving the custodian. The service coordinates custody and lending systems throughout the loan cycle, while the custodian continues to manage the collateral.
Loan monitoring relies on a shared data source between the market and the custodian. The market uses Chainlink Data Feeds for onchain price data, while Chainlink Data Streams sends the same values directly to the custodian’s offchain systems. In the event of liquidation, the designated collateral agent sells the assets according to its procedures. The proceeds are then recorded onchain before final settlement. Anchorage said it will monitor loan health and manage margin and liquidation throughout the loan cycle, while the assets remain with the regulated custodian.
Chainlink places the service in two markets of different sizes: the company estimates the value of digital assets held by custodians at nearly $700 billion, or less than 0.5% of the $250 trillion in total traditional assets held in custody. By comparison, it says DeFi lending markets have more than $80 billion in deposits and more than $30 billion in active loans. These figures provide context for the scale of assets that could be targeted by borrowing against custodied collateral, compared with activity in existing lending markets. They remain estimates and figures cited by Chainlink in its service announcement. The launch announcement did not disclose the volume of loans executed through CustodySync.
The idea overlaps with a separate proposal published by Aave Labs on September 14 to create an isolated Hub and Spoke on Aave V4, aimed at lending stablecoins against institutional collateral held in custody by Anchorage. The document proposes one Hub and one Spoke under Aave DAO governance, with no changes to existing markets or reserves. It also calls for isolating collateral in dedicated units so that no exposure path is created to assets or reserves in other units, while the DAO retains control over parameters and limits. An Aave Labs update published on October 1 said Aave V4 deposits exceeded $1 billion for the first time during September, with $310 million in active loans. The update said Aave V4 deployment expanded during the same month to the Arc and Base networks, and that the custodied-collateral proposal was among that month’s work.
Risk parameters, oracle settings, limits and the interest-rate strategy in Aave’s proposal are not yet final; the document said they would be completed with the DAO’s risk service providers before an AIP proposal is submitted. This puts the proposal on a governance track, rather than presenting it as a fully operational market whose launch has been announced. In a filing with the Securities and Exchange Commission in October, Grayscale said Anchorage would custody part of the LINK holdings of the Grayscale Chainlink Trust ETF, while Coinbase would remain the primary custodian. Grayscale did not specify how much LINK it would transfer to Anchorage, leaving the amount of assets held by each custodian to the sponsor’s discretion. The filing said the amended custody agreement requires at least $100 million in total insurance coverage, while cautioning that shareholders do not guarantee the sufficiency of the insurance or its coverage of losses. Chainlink also cautions that features differ among custodians and that some may not be available at Anchorage Digital Bank.