As traditional finance (Tradfi) moves more and more into the crypto space, tensions are erected between decentralisation advocates and institutional giants.
Citadel’s securities, fidelity and BlackRock are jumping in. Citadel plans to become a crypto liquidity provider.
Many crypto purists argue that the arrival of major financial institutions threatens one of the core principles of crypto: decentralization. “When an agency enters the space and controls most of the market, it loses all the benefits of decentralization,” critics argue.
Many cryptography advocates are not satisfied with this. For those who feel this way, Tim Renewm, CEO of BCB Group, has advice. “We’ll stop the fight over who’s right and learn to come together.”
One of the fundamental aspects of Bitcoin and Cryptocurrency is that it is decentralized. No one can control it.
Michael Saylor, who owns almost 2% of the total Bitcoin supply, cannot use his Bitcoin in a way that you and I cannot. They say that when institutions enter the space and control a huge portion of the market, they lose all the benefits of decentralization.
Update believes these fears are unfair, even if they can be understood. “The two who come with it have to happen, or it will stall,” he pointed out.
He also pointed out the benefits of having a large institution involved in cryptography, as well as the lessons that both industries can learn from one another.
“We need to learn about regulations, access to liquidity and what TRADFI has. This is banks that put a lot of money in. They have a regulatory framework and can affect government policies,” he explained. “In traditional finances, it will be closed until Monday at 5pm on Fridays. That’s what they need to learn from defi.”
Institutional players are looking for ways to increase their exposure to code.
The obstacle for them was the ambiguous regulation of digital assets.
In the US, concerns about litigation and other legal implications have been that the Trump administration has regained power and forgot about changes in leadership in the SEC, but there is still a lack of clarity about what is permitted and what is not.
As institutions grow their exposure, they will use their influence to help standardize global regulations in the industry.
“The more TRADFIs are involved, the more standardized they need to be. If you are dealing with a variety of regulatory climates and circumstances, you cannot expand your global business to what a large institution wants.