The crypto industry is hitting a wall. While major banks, investment companies and financial giants have already processed billions in blockchain transactions, full-scale adoption in traditional finance is still far apart.
According to a Bloomberg feature report, the problem is that regulations are confused, infrastructure is weak, and institutions still don’t fully understand crypto.
With Donald Trump returning to the White House, the US has taken a custody position, and crypto assets (MICA) regulations are in effect in the European market. Wall Street executives are analyzing what Crypto needs to move from the edge of finance to the center.
Regulation disruption delays the adoption of institutional codes
Naveen Malla, co-head of Kinexys by JPMorgan, says clear rules and better cooperation between regulators and businesses is needed.
“Expanding regulations, extensive industry collaboration and strong public-private partnerships are key components of the expansion of digital assets in traditional finance.”
JPMorgan’s Kinexys Digital Payments, a blockchain-based payment system, already processes more than $2 billion a day.
Caroline Butler, global head of digital assets at BNY Mellon, says the biggest change needed is a strong institutional grade blockchain infrastructure that connects crypto with traditional finance.
“We expect an accelerated phase in which digital assets will mature and deep integration into the financial ecosystem over the next 12-36 months.”
BNY Mellon is already a major player, providing fund services to US Crypto ETFS, acting as manager of BlackRock’s tokenized money market fund Buidl, and is also taking part in the European Investment Bank’s digital bond issuance.
John O’Neill, group head of digital assets at HSBC, says the solution is tokenized deposits.
“HSBC believes that safe and reliable forms of digital money, such as tokenized deposits, can speed up the adoption of digital assets.”
HSBC has already issued multiple digital bonds in 2024, including $128 million in digital native bonds.
Societe Generale-Forge CEO Jean-Marc Stenger points to Republican support for US Crypto as a game changer. He says that the European MICA regulations, which came into effect on December 30, 2024, create a clear rulebook for the crypto market.
His company, Forge, has been heavily involved in the issuance of digital bonds and has launched EurcV, the first euro stable issued by major banks.
Artem Korenyuk, head of City’s digital assets, agrees that regulatory clarity is important.
“We are encouraged to focus on establishing clarity in the regulation of US digital assets.”
Citi is already developing a City token service, allowing corporate clients to send blockchain-based payments.
Public Blockchain vs Private Blockchain: Where do agencies stand?
Robert Mitchnick, head of digital assets at BlackRock, says public blockchains outweigh private blockchains.
“Public blockchain was a clearer winner than the private blockchain counterparts in terms of activity level and adoption.”
BlackRock runs two major Crypto ETFs, including the iShares Bitcoin Trust. The company also manages Buidl, the tokenized money market fund of Ethereum, with $1 billion in assets.
John Whelan, managing director of Crypto at Banco Santander, says traditional finance requires regulatory approval for the use of public blockchains.
“TRADFI needs to seek explicit regulatory clearance to use public blockchains, as this is where true innovation exists.”
Santander is committed to digital securities, collateral mobility and digital cash.
Julian Sawyer, CEO of Zodia Custody, says compliance is stopping traditional funds from fully accepting crypto.
“Traditional financial institutions cannot challenge their digital assets until they can ensure compliance with the complex operational requirements already in place.” Boased by Standard Chartered, Zodia Custody works with Invesco and ETF publishers such as 21Share and Bitwise.
Jorgen Ouaknine, Euroclear’s group head of innovation, says standardization ultimately brings Crypto to mainstream finance.
“Standardization has been a key factor behind the successful scaling of almost all major technological and financial innovations throughout history.”
Euroclear tests blockchain solutions for bond issuance and market liquidity.
Education and collaboration remain major obstacles
Mike O’Reilly, president of Fidelity Digital Assets, says the education gap is suppressing codes. “Education, or lack of it, is one of the biggest drivers or deterrents for adoption in the crypto field.”
Fidelity offers crypto management and execution services for Bitcoin, Ether and Litecoin. The company operates Fidelity Crypto, allowing retailers and asset managers to exchange cryptos.
Laser Digital CEO Jez Mohideen still says the agency still doesn’t understand the difference between Crypto, Web3 and tokenization.
“By investing in targeted education and promoting a deeper understanding of the opportunities and benefits offered by blockchain-enabled products and services, institutions can set themselves up to be more effective in engagement.”
Backed by Nomura Holdings, Laser Digital offers crypto trading, asset management and Ministry of Finance services.
Nadine Chakar, global head of digital assets at DTCC, says the biggest problem is that companies work in silos rather than collaboration.
“It’s easy. We need to stop experimenting with silos and start working together across the industry to reach the full potential of financial services blockchain.”
DTCC purchased blockchain startup quarantine in 2023 and launched a tokenization sandbox for financial institutions.
Sandy Cowl, head of digital assets at Franklin Templeton, says U.S. regulators have changed courses and are now pushing for the adoption of public blockchains.
“This should remove existing obstacles that are blocking traditional ecosystems and cryptographic ecosystems coming together.”
Franklin Templeton is expanding its blockchain-based financial services and tokenized assets.
Laurence Arnold, global head of innovation at Axa IM, says the lack of work is a digital currency that functions like Fiat. “These digital currencies can be private or public, but they must have the same characteristics as Fiat currencies.”
AXA IM has collaborated with the European Central Bank on the development of the central bank’s digital currency, investing 3 million euros in Slovenia’s digital bonds.
Haiderjaffrey, head of UBS’s strategic venture, says institutions need clear rules before digging deep into the code. UBS is involved in digital bond issuance, Fnality Global Payments System, Digital Repo, and Digital Margining.
