Client Demand and ‘Negative Events’ Pushing Tradfi Institutions Towards Crypto — Bitrue Chief Strategy Officer

Growing client demand for cryptocurrencies and the belief that they represent a new asset class help to explain traditional financial institutions’ newfound interest in digital assets, the chief strategy officer at Bitrue has said. The collapse of FTX and Terra Luna in 2022 and the resulting bear market may have helped to remove barriers to entry. The entrance and presence of “tradfi” (traditional finance) institutions in the crypto market will also likely lead to the “establishment of industry standards,” according to the executive.

Removal of Cost to Entry

After spending years attacking and maligning digital assets, an increasing number of traditional finance (tradfi) institutions are seeking exposure to crypto assets, Robert Quartly-Janeiro, the chief strategy officer (CSO) at crypto exchange Bitrue, has asserted. He said client demand for cryptocurrencies as well as the growing belief that these represent a new asset class are some of the reasons why tradfi institutions have seemingly had this change of heart.

Quartly-Janeiro, who has served as a visiting fellow at The London School of Economics, also told Bitcoin.com News that the changed circumstances which followed the collapse of FTX could be another key influencing factor.

“The negative events that occurred during that time [between 2021 and 2023] — such as FTX, Luna, and others — and the subsequent bear market removed some of the barriers regarding the cost of entry and acquisition. This created an opportunity for these institutions to enter the market, leveraging their brand equity and financial capabilities,” Quartly-Janeiro explained.

Risks and Benefits

While the prospect of traditional financial institutions entering the crypto market is sometimes a contentious topic, the Bitrue CSO said he can see both benefits and risks. Some of the benefits include increased trade volume, expanded consumer choice, and enhanced professionalism. The entrance and presence of tradfi institutions in the crypto market will also likely lead to the “establishment of industry standards.”

However, when it comes to the risks, Quartly-Janeiro suggested that different players in the crypto market may have different views on this. For instance, some crypto entities may see the increased competition from well-capitalized legacy financial institutions as a threat to their business models. Still, some see the “risk of spillovers in areas like stablecoins that are linked to real-world assets and currencies.”

For traditional financial institutions seeking to enter the crypto market, Quartly-Janeiro suggested joint ventures or outright acquisition of existing crypto entities. This, he said, may be a better alternative to building everything from scratch. As for decentralized finance (defi) projects that are eager to partner with tradfi, the Bitrue CSO said gaining deep knowledge of both the defi and traditional financial worlds could prove to be useful.

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