The crypto industry is hitting a wall. Big banks, investment firms, and financial giants are already handling billions in blockchain transactions, yet full-scale adoption in traditional finance is still far off.
The problem, according to a Bloomberg feature report, is that regulation is a mess, infrastructure is weak, and institutions still don’t understand crypto well enough.
With Donald Trump back in the White House, the U.S. is taking a pro-crypto stance, and Europe’s Markets in Crypto-Assets (MiCA) regulation is now in effect. Wall Street executives are analyzing what it will take for crypto to move from the edges of finance to the center.
Regulatory confusion slows institutional crypto adoption
Naveen Mallela, the co-head of Kinexys by JPMorgan, says clear rules and better cooperation between regulators and businesses are necessary.
“Greater regulatory clarity, widespread industry collaboration, and strong public-private partnerships will be the key elements for the scaling of digital assets in traditional finance.”
JPMorgan’s Kinexys Digital Payments, a blockchain-based payment system, is already processing more than $2 billion per day.
Caroline Butler, the global head of digital assets at BNY Mellon, says the biggest change needed is a strong institutional-grade blockchain infrastructure that connects crypto and traditional finance.
“Over the next 12 to 36 months, we anticipate an acceleration stage where digital assets will mature and integrate deeper into the financial ecosystem.”
BNY Mellon is already a major player, offering fund services for U.S. crypto ETFs, acting as a custodian for BlackRock’s tokenized money-market fund BUIDL, and even participating in the European Investment Bank’s digital bond issuance.
John O’Neill, the group head of digital assets at HSBC, says the solution is tokenized deposits.
“HSBC believes that safe, reliable forms of digital money, such as tokenized deposits, can speed up digital asset adoption.”
HSBC has already issued multiple digital bonds, including a $128 million digitally native bond in 2024.
Jean-Marc Stenger, the CEO of Societe Generale-FORGE, points to Republican support for crypto in the U.S. as a game-changer. He says Europe’s MiCA regulation, which took effect on December 30, 2024, creates a clear rulebook for crypto markets.
His firm, FORGE, has been deeply involved in digital bond issuances and even launched EURCV, the first euro stablecoin issued by a major bank.
Artem Korenyuk, the head of digital assets at Citi, agrees that regulatory clarity is key.
“We are encouraged by the growing focus on establishing regulatory clarity for digital assets in the U.S.”
Citi has already been developing Citi Token Services, which allows corporate clients to send blockchain-based payments.
Public blockchains vs. private blockchains: Where do institutions stand?
Robert Mitchnick, the head of digital assets at BlackRock, says public blockchains have outperformed private ones.
“Public blockchains have been the clear winner over their private blockchain counterparts in terms of activity levels and adoption.”
BlackRock runs two major crypto ETFs, including the iShares Bitcoin Trust, which became the fastest ETF in history to hit $50 billion in assets. The firm also manages BUIDL, a tokenized money-market fund on Ethereum with $1 billion in assets.
John Whelan, the managing director of crypto at Banco Santander, says traditional finance needs regulatory approval to use public blockchains.
“TradFi will need to seek explicit regulatory clearance to use public blockchains because that is where true innovation exists.”
Santander has been working on digital securities, collateral mobility, and digital cash.
Julian Sawyer, the CEO of Zodia Custody, says compliance is stopping traditional finance from fully embracing crypto.
“Traditional financial institutions cannot venture into digital assets until they can ensure compliance with the complex operating requirements already in place.” Zodia Custody, backed by Standard Chartered, works with Invesco and ETF issuers like 21Shares and Bitwise.
Jorgen Ouaknine, the group head of innovation at Euroclear, says standardization is what will finally bring crypto into mainstream finance.
“Standardization has been the critical factor behind the successful scaling of nearly every major technological and financial innovation throughout history.”
Euroclear has been testing blockchain solutions for bond issuance and market liquidity.
Education and collaboration remain major roadblocks
Mike O’Reilly, the president of Fidelity Digital Assets, says education gaps are holding crypto back. “Education — or lack thereof — is one of the biggest drivers — or deterrents — of adoption in the crypto space.”
Fidelity offers crypto custody and execution services for Bitcoin, Ether, and Litecoin. The firm runs Fidelity Crypto, allowing retail and wealth managers to trade crypto.
Jez Mohideen, the CEO of Laser Digital, says institutions still don’t understand the differences between crypto, Web3, and tokenization.
“By investing in targeted education and fostering a deeper understanding of the opportunities and advantages blockchain-enabled products and services provide, institutions can position themselves to engage more effectively.”
Laser Digital, backed by Nomura Holdings, provides crypto trading, asset management, and treasury services.
Nadine Chakar, the global head of digital assets at DTCC, says the biggest issue is that firms are working in silos instead of collaborating.
“It’s simple: we need to stop experimenting in silos and start collaborating industry-wide to realize the full potential of blockchain in financial services.”
DTCC bought blockchain startup Securrency in 2023 and launched a tokenization sandbox for financial institutions.
Sandy Kaul, the head of digital assets at Franklin Templeton, says U.S. regulators have changed course and are now pushing for public blockchain adoption.
“This should remove existing roadblocks that are inhibiting the coming together of the traditional and crypto ecosystems.”
Franklin Templeton has been expanding its blockchain-based financial services and tokenized assets.
Laurence Arnold, the global head of innovation at AXA IM, says the missing piece is digital currencies that function like fiat. “These digital currencies could be private or public but need to have the same characteristics as fiat currencies.”
AXA IM has worked with the European Central Bank on central bank digital currency development and invested €3 million into Slovenia’s digital bond.
Hyder Jaffrey, the head of strategic ventures at UBS, says institutions need clear rules before diving deeper into crypto. UBS has been involved in digital bond issuances, the Fnality global payments system, digital repo, and digital margining.
