Wall Street Giants Diving into Crypto,How Will They Change the Game?

Renowned financial entities such as Standard Chartered, Nomura, and Charles Schwab are venturing into the creation and funding of crypto exchange and custody platforms, according to a report by the Financial Times on May 31. Despite recent market volatility and crypto-related controversies, these established firms remain optimistic about fund managers' continued interest in crypto trading.

Events like the FTX bankruptcy and Terra ecosystem collapse underscored the risks associated with largely unregulated exchanges. Yet, these traditional institutions are betting on their familiar and regulated status to lure asset managers, over crypto-specific platforms like Binance.

A recent survey by EY-Parthenon of 250 asset managers revealed that half would consider switching to a traditional-backed company if similar services were offered. Furthermore, 90% trusted traditional financial groups with the custody of their crypto assets.

Traditional firms aim to establish more transparent platforms in response to last year's crypto company collapses and allegations of misconduct. Leveraging their finance industry expertise, stellar reputations, and minimal regulatory scrutiny, they intend to draw in clients. These legacy-backed crypto platforms will compete directly with Coinbase and Binance.

Notably, these firms will prioritize transparent operations, particularly by separating exchanges from asset custody to mitigate conflicts of interest and minimize risk. BNY Mellon and Fidelity already have distinct crypto custody divisions, and Nasdaq awaits regulatory approval for its service. Jez Mohideen, CEO of Nomura's crypto trading and VC firm, Laser Digital, emphasized that traditional firms' involvement would foster transparency and pricing convergence.