Traditional financial institutions are increasingly shaping the narratives in the crypto sector, and are poised to benefit the most from the current trends, according to Arthur Azizov, founder of B2 Ventures, a private “alliance” of crypto services and financial tech companies.
Azizov told Cointelegraph that this market cycle has been dominated by institutional investors, investment vehicles like exchange-traded funds (ETFs), governments, and stablecoin issuers.
The total cumulative flow of Bitcoin ETFs shows that billions of dollars in capital has been siphoned into Bitcoin investment vehicles. Source: Farside Investors
He also said that big banks will accelerate this trend in the near future, once they have regulatory clarity to interact with crypto, saying it will only be a “matter of months” between the time these banks receive regulatory clarity and the time it takes them to launch a stablecoin. Azizov added:
“Banks have a substantial user base. They already have their own clients. Those clients are loyal to those banks. And for them to implement crypto into their operations will be relatively easy.”
These institutions have already changed the landscape. In the future, it’s going to change even more, and I would say it’s not good for small startups,” he continued.
The increasing presence of institutional investors, banks, and companies in crypto has created tension between these traditional financial institutions and the cypherpunks that started the crypto movement, who advocate for the complete decentralization of the financial system
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The government is also driving the institutionalization of crypto
Governments also have economic incentives to regulate crypto and bring it under the purview of the traditional financial system.
“The narrative is to regulate crypto, not only because it is mainstream, but in order to attract technology companies, attract young talent, and fintech startups, Azizov told Cointelegraph.
This increased regulation means a greater focus on anti-money laundering (AML) regulations and know-your-customer (KYC) requirements, he added.
AML and KYC are already required for retail crypto consumer applications throughout much of the Asia-Pacific (APAC) region and Europe, and Azizov said he expects this trend to also take shape in the US.
The emphasis on consumer surveillance and officially registered accounts runs contrary to the value proposition of decentralized finance (DeFi), which promises permissionless access to a censorship-resistant financial system.
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