Cryptocurrency is continuing to gain traction in today’s economy as the crypto industry progresses despite the market correction and bankruptcies witnessed a year ago. Bank of America's (BAC) note from Thursday notes that Nasdaq (NDAQ), an exchange operator, plans to launch a digital asset custody service this quarter in an effort to meet the institutional demand that's driving the offering of institutional-grade products. This will help to create an environment in which digital asset users can trust and rely on their counterparty provider.

Bank of America believes that these collapses create an opportunity for experienced traditional finance firms, known as TradFi, to fill the void with their institutional-grade products. Additionally, details from the U.S. Securities and Exchange Commission’s (SEC) Enhanced Safeguarding Rules further highlights the need for trusted and experienced TradFi firms as it has limited the ability of registered investment advisers and their clients' ability to rely on crypto-native exchanges for their custody.

Additionally, Bank of America believes that “TradFi institutions remain the counterparty of choice,” due to the existing risk and uncertainty in the crypto industry. The SEC’s enforcement policy towards digital assets is becoming increasingly rigid, with the Commission’s December statement emphasizing the need for traders to comply with regulatory requirements.

What all of this ultimately means is that TradFi, or traditional finance firms, will continue to be the driving force behind the vast majority of institutional crypto investments. This is largely because these firms are the most reliable and trusted to provide the high level of institutional-grade products and services that are needed to provide a secure and compliant environment for the digital assets community.

Overall, the crypto industry is continuing to develop and become increasingly secure no matter how rocky the market behaves. Institutions need to continue to be vigilant about their counterparty risk and must ensure that custody, exchanges, and broker-dealers are siloed and independent from one another. What’s clear is that TradFi remain the counterparty of choice for institutional crypto investors due to their reliable and trusted expertise that allows them to provide the secure and compliant environment needed to propel the crypto industry forward.



Other News from Today