Established Wall Street firms like Standard Chartered, Nomura, and Charles Schwab are actively involved in developing or sponsoring new crypto exchange and custody systems, according to a Financial Times report.
Traditional firms bank on their reputation, finance industry expertise, and regulatory approval to attract crypto business.
These firms believe that despite market volatility and past crypto scandals, fund managers will still be interested in trading cryptocurrencies.
The recent failures in the Terra ecosystem and FTX bankruptcy have shed light on the risks associated with investing in largely unregulated exchanges.
Legacy companies are betting that asset managers prefer conducting business with reputable institutions rather than crypto-specific exchanges like Binance.
A recent study by EY-Parthenon revealed that half of the asset managers surveyed would consider moving if a traditional-backed company offered similar services to crypto-native groups.
“The large, prestigious, traditional institutional investors definitely prefer dealing with counterparties who they know have been in operation for years and have been regulated in the traditional sense.”
Additionally, the majority of respondents believed that traditional financial institutions would serve as custodians for their assets.
To compete, traditional finance companies are striving to create more transparent platforms, particularly by separating asset custody from exchanges to avoid conflicts of interest.
BNY Mellon and Fidelity already operate separate crypto custody divisions, while Nasdaq is awaiting regulatory approval for its service.
Moreover, the entry of established businesses into the cryptocurrency market is expected to bring more transparency and convergence in pricing, as stated by Jez Mohideen, CEO of Laser Digital, a Nomura-owned trading and venture capital firm.