Chainlink launches CustodySync to connect institutions to DeFi lending

Chainlink has introduced CustodySync, a new solution designed to allow institutional clients to participate in decentralized finance (DeFi) lending markets while their assets remain within regulated custody. The system aims to bridge the gap between the $700 billion digital asset custody market and the $80 billion DeFi lending market.

Anchorage Digital, a federally chartered U.S. digital asset bank, is the official launch partner and the first custodian to adopt the technology. CustodySync works by synchronizing custody and lending infrastructure through Chainlink Proof of Reserve, which publishes on-chain custody balances. The system issues transfer-restricted receipt tokens that represent the custodied assets to serve as collateral in lending markets.

To mitigate risk, custodians and lending protocols utilize the same price data from Chainlink Data Feeds and Data Streams to calculate loan-to-value ratios. This shared data source is intended to prevent mismatched valuations that could lead to improper liquidations. Under the current arrangement, Anchorage retains the collateral and manages margin and liquidation processes.