Trends in Digital Assets 2025

What Institutions Need to Know About Crypto and Digital Asset Convergence

This report explores the challenges facing financial institutions as they seek to increase exposure to digital asset markets, including cryptoassets, tokenised securities and other blockchain-centric financial products.

Published on: 13 Feb, 2025somdn_product_page

Description

With the return of US President Trump to the White House, cryptocurrency advocates look forward to rapid changes in regulation and the soaring price of Bitcoin and other cryptocurrencies added fuel to the debate on deregulation of crypto.

Meanwhile, less noisily, the deepening integration of digital assets into the global financial system – thanks, in part, to regulatory developments alongside soaring investor demand and a greater understanding of the potential of cryptoassets as an asset class – was one of the main capital markets trends in 2024.

With the origin of cryptocurrencies firmly rooted in retail markets, however, greater institutional interest in cryptoassets is exposing regulatory and structural shortfalls that must be addressed if wider and timelier institutional uptake of cryptocurrencies is to take place.

While financial institutions have largely been exploring cryptocurrencies since 2017, the biggest roadblock to greater adoption of crypto assets and overall maturation of the industry at an institutional level is uncertainty, with some financial institutions reluctant to fully embrace it in the face of regulatory and structural ambiguities.

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Table of Contents

  • 1.0 Beyond Bitcoin: How Institutions are Legitimising Crypto
    • 1.1 The Current State of Crypto
    • 1.2 Crypto Volatility Concerns Banks
    • 1.3 The Rise of the Digital Asset
    • 1.4 Retrofitting the Infrastructure
  • 2.0 Convergence of Traditional Finance and Cryptoassets
  • 3.0 Inconsistencies in Global Regulation Remain
    • 3.1 MiCA Moves EU Crypto Regulation to a New Level
    • 3.2 US Regulators are Fighting Turf Wars
    • 3.3 UK Defaults to Existing Regulations
    • 3.4 High Institutional Market Activity but Varying Regulations
      • 3.4.1 Asia Pacific
      • 3.4.2 Singapore
      • 3.4.3 Japan
  • 4.0 Accommodating Digital Assets Creates New Infrastructural Challenges
    • 4.1 Custodian Questions Continue to Blight Crypto Markets
    • 4.2 Counterparty Settlement Risk Remains a Concern
    • 4.3 Deciphering Digital Asset Data
      • 4.3.1 On- and off-chain Data
    • 4.4 Tokenisation to the Rescue?
  • 5.0 Still Needs Work: Digital Assets Require New Foundations
  • 6.0 Appendix
    • 6.1 Table of Figures