TradFi Remains the Counterparty of Choice for Institutional Crypto Investors: Bank of America

Crypto company collapses create a void in the ecosystem that trusted and experienced traditional finance firms may look to fill, the report said.

AccessTimeIconApr 14, 2023 at 10:44 a.m. UTC
Updated May 9, 2023 at 4:12 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The crypto ecosystem is continuing to develop, despite the market correction and bankruptcies witnessed last year, Bank of America (BAC) said in a note Thursday, following a report that exchange operator Nasdaq (NDAQ) plans to launch a digital asset custody service by the end of this quarter.

Institutional demand is driving the offering of institutional-grade products, with Nasdaq just the latest traditional finance, or TradFi, firm to offer more services in the digital assets space, the report said.

Bank of America says institutional investors remain engaged and focused on the “disruptive nature of blockchain technology over the longer term.”

The bank says it expects crypto company collapses to slow institutional trading as they “reevaluate counterparty risk and ensure that custody, exchange and broker-dealers are separate entities or siloed.”

However, these collapses create a void in the crypto ecosystem that “trusted and experienced TradFi firms offering institutional-grade products may fill,” analysts Alkesh Shah and Andrew Moss wrote.

The U.S. Securities and Exchange Commission’s (SEC) Enhanced Safeguarding Rules could limit the ability of registered investment advisers to provide custody for clients’ tokens on most crypto-native exchanges, which will further drive TradFi institutions into the space, the report added.

“Our view is that TradFi institutions remain the counterparty of choice,” the bank said.

Edited by Sheldon Reback.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.