With the SEC continuing to fine, prosecute, and take action against crypto exchanges, stablecoin issuers, and many crypto firms, there is a bright side to crypto adoption. With Bitcoin (BTC
Ironically, this recent spike in the price of bitcoin and other crypto assets has a lot to do with the traditional financial institutions that cryptocurrency was originally designed to destroy. Recent efforts include the listing of Bitcoin ETFs by Wall Street heavyweights Blackrock, Invesco and WisdomTree, and the ongoing deployment of enterprise blockchain solutions and custody tokens by major US bank JP Morgan.
Aside from the bitcoin maximalists, whose vision of a world made entirely of bitcoins seems less likely right now, cryptoasset investors, developers, and entrepreneurs should take note of this news. Despite near-constant regulatory pressure from US regulators and a negative environment from US politicians, the acceptance and integration of crypto assets into financial markets continues to grow. The details of these efforts vary from institution to institution, but the focus remains the same. Many cryptocurrencies are used in traditional finance.
Let's take a look at some of the reasons why, despite ongoing regulatory measures, TradFi is key to the next phase of crypto asset growth.
Institutional and Client Access
Institutional traders dominate the financial markets, particularly the traditional stock and debt markets, which increasingly include cryptocurrencies, large pools of capital, and products and services developed by these companies. Blackrock CEO Larry Fink, for example, has long advocated tokenization of financial assets, calling it a trillion-dollar opportunity for the future. It should be borne in mind that the total number of customers who are expected to invest in these initial products, subject to their approval, is limited. The institutional investments and lessons learned from these negotiations will only fuel these efforts further.
As for the last point, the long list of proposed ETFs and cryptocurrencies rejected by the Securities and Exchange Commission (SEC) has one thing in common: they were all submitted by the original crypto companies. With the SEC's ongoing crackdown on crypto exchanges and companies, the best approach for the industry seems to be to consider TradFi's interest in crypto. While some may view these organizations as enemies of crypto innovation, the access and experience these organizations offer will prove invaluable.
Improve central exchanges
Centralized exchanges in the cryptocurrency space do not have a good reputation to say the least; The collapse of FTX continues to 1) cast a shadow over the crypto industry as a whole and 2) impact regulatory decisions in the US and abroad. Resolving these issues will be a multi-year process, and the launch of a new centralized cryptocurrency exchange is likely to generate new questions and attention from regulators. This has once again allowed traditional financial institutions to enter the crypto asset industry extensively.
A new core cryptocurrency exchange has also been launched alongside some of the world's largest financial firms ordering Bitcoin ETFs. EDX Markets is backed by Fidelity Digital Assets, Charles Schwab and Citadel Securities. It makes sense to wonder how such a centralized exchange would function differently than exchanges that have failed (like FTX) or are being sued by the SEC (like Coinbase).
In response to these concerns, EDX Markets CEO Jameel Nazarali said that the company differed from other cryptocurrency exchanges in that it did not offer custody services for client assets. Instead, due to TradFi's impact on this exchange, users have to turn to other financial intermediaries to buy and sell crypto assets. The separation of exchange and broker functions should lead to a more flexible regulatory environment.
More transparency and consistency
Perhaps the greatest appeal and benefit of TradFi's growing interest and investment in crypto is the benefits it derives from working with large established institutions. While established banks and other financial institutions are regularly penalized for a range of activities, the reality is that bringing these entities into the crypto space will ensure transparency and consistency in data reporting and management.
Regulations and other compliance requirements may not be entirely in line with the original idea of cryptocurrencies, or directly consistent with the idea of moving and destroying things quickly, but it's hard to overdo it when you put them in the hands of the customers. Safety measures. Especially after the rise of FTX and the problems other exchanges have faced, the fixation on established companies is likely to prove a market stabilizer.
TradFi is approaching cryptocurrency and could be the best choice for market development in the long term.