As crypto evolves, matures, and generates more use cases, traditional finance players are starting to develop their crypto offer.

This first happened in 2019, when the crypto markets were recovering from the dramatic crash a year prior.

Then, a big number of major TradFi firms pledged their intentions to develop crypto products and services: Fidelity, JP Morgan Chase, Nasdaq, Bakkt (subsidiary of ICE, or Intercontinental Exchange), Goldman Sachs, Citigroup, UBS, Nomura Holdings, Mizuho, VISA, Mastercard, Société Générale were some of the big names.

The trend continued, albeit with less enthusiasm, during the bull run of 2020 (Standard Chartered, MassMutual, PayPal) and 2021 (Morgan Stanley and BNY Mellon), before waning during the subsequent bear market.

Could the growing institutionalization be a threat to the crypto industry?

Some purists within the crypto community have expressed their concern with Big Finance actively moving into crypto. After all, the blockchain was created to get rid of intermediaries, while traditional banks, asset managers, and other financial firms offering crypto services are reintroducing the middleman into the process.

However, many investors prefer to entrust their crypto investments to institutions. This creates demand for more crypto-focused TradFi services.

Moreover, one could argue that a truly decentralized cryptocurrency, like Bitcoin, cannot be banned, and those who prefer to use it as intended, i.e. without intermediaries, will always be able to do so.

In a surprising turn of events, even the IMF, one of crypto’s harshest critics, has declared the same in its recent report dedicated to Latin America:

“While a few countries have completely banned crypto assets given their risks, this approach may not be effective in the long run.”

The IMF speaks mostly about Argentina, the country it obliged to “discourage the use of cryptocurrencies in prevention of money laundering and informality” last year, in exchange for restructuring its $45 billion debt.

The ban surely stifled the development of crypto finance in the country, but did not have any significant effect on the use of cryptocurrencies by regular Argentinians. Crypto analytics company Chainalysis ranked Argentina 13th in its 2022 global crypto adoption index.

Overall, the growing effort that big TradFi firms put into developing their crypto products and services looks encouraging for the crypto markets. It lays the foundation for a wider adoption among people who are not ready for self-custody and inevitably creates more demand for cryptoassets. Big Finance also has an undeniable influence over political processes, and in countries like the US, it could really impact the direction of crypto-related policies and regulations.

Written by D.Center