Institutions have forced crypto to grow up, and that’s a good thing | Opinion

It’s been a long and winding road for the blockchain industry and crypto community to rehab its reputation and regain footing on solid ground. And it still has a long way to go.

The past year, however, and the last four months or so specifically, has shown how worthwhile projects have been able to gradually shake off the industry’s image as a gang of juvenile interlopers in the tech and financial realms. In a way, we can thank the last devastating bear market, which put crypto in an unprecedented ice age that decimated what many considered irrefutably stable fixtures in the industry. Who would have ever guessed that FTX would be where it is today three years ago?

With signs now pointing towards a full-fledged bull market, a few key drivers are clear catalysts for this renewed period of blockchain prosperity. The chief among them are institutions, especially those from the traditional financial realm, stepping into the blockchain arena.

Of course, the match that sparked the flame here is the slate of Bitcoin spot ETF approvals by the US Securities and Exchange Commission at the top of the year. This move has ignited heavier institutional interest and concrete moves from traditional financial giants to offer crypto services and investment vehicles to their clientele.

As someone who has been involved in crypto and written about the industry for years, I find it encouraging to see marquee names in traditional finance finally embracing certain aspects of blockchain technology. This is especially so after many years of institutional leaders rebuking crypto as a whole or circling the industry without making any meaningful moves. But what’s caused this change in events now?

Cleaning up the act

Crypto’s evolution over the years follows a very non-linear path to maturation. This path keeps going as new technologies, projects, and use cases emerge and push the industry’s capabilities forward.

That being said, there has been a concerted effort by projects within the industry to clean up their act since the last bear market arrived in full force. Yes, every bear market in the past has flushed out scammy projects and made room for legitimate companies to get a foothold. But this time around, the image change has gone beyond a superficial rebrand that would cover up unsustainable business practices.

Part of this can be attributed to something entirely beyond the crypto industry’s control: regulatory clarity. Even a year ago, regulations and laws on crypto worldwide were less fleshed out than today—and more rules are in the pipeline. Because of this newly established regulatory reality, however, blockchain projects have more defined guidelines to ensure their development doesn’t happen illegally.

Likewise, regulatory clarity opens the door for traditional institutions to enter the fold, knowing they’re not embracing a pariah industry. Crypto still has a contentious relationship with regulators, but industry leaders are much more willing to put compliance at the forefront of their operations—mimicking the way banks and other major financial institutions work.

And institutions clearly like to reward those efforts with collaboration and capital.

Now, you have blockchain projects that are focused squarely on business and institutional usage rising in popularity. For instance, you have Ripple leading the charge as a long-time go-to network and protocol specifically for enterprise use. But now, startups such as Coreum are taking this enterprise-level cooperation one step further by creating a bridge to its network from Ripple’s XRP Ledger—essentially enabling businesses utilizing Ripple’s protocol to boost liquidity and put their digital assets to work in new ways. By utilizing ISO 20022 messaging, Coreum shows how blockchain networks can entice institutional engagement by implementing international standards of financial communication.

While Ripple has been focused on institutions from its inception, its partners provide services enticing for institutions searching for a way into the blockchain. While the interest is there, it accompanies an age-old question as to how institutions approach offering blockchain adoption.

Like any new technology an institution looks to onboard, it has to reckon with whether that manifests through developing a proprietary product in-house or partnering with established companies within the space to partner up and guide them along the way. Crypto is no exception here, and this question has become more heated now that institutions are taking blockchain seriously.

In reality, whether institutions go in-house or in partnership when it comes to adopting blockchain boils down to budget and technical feasibility based on what they want to achieve. If it’s something as rudimentary as offering a spot ETF, they can likely do it in-house. Other offerings might not be so simple.

For instance, tokenizing real-world assets has become a major driver of institutional activity in adopting blockchain technology, and this is where a more robust infrastructure is required to ensure everything runs smoothly and securely. While institutions might choose to go down that journey alone, companies like GK8 have consistently partnered with leading institutions by offering a platform that guides them through every step of the way of digital asset tokenization. Likewise, a blockchain-native platform like GK8 has its digital asset security and custody bona fides set in stone by utilizing offline storage and token issuance—effectively making an institution’s assets unreachable to hackers.

So unless an institution is willing to go the extra mile here to develop an in-house solution that can measure up to already existing companies doing the same thing, it might be more cost-effective and secure in the long run to partner up. After all, the crypto industry knows a thing or two about how much damage a hack can do; therefore, it can guide institutions to avoid a similar fate.

Extending the goodwill

Again, all of these strides in institutional blockchain collaboration stem from projects seriously taking the time out of the limelight to regroup and redevelop technology to serve critical areas. The efforts to attain institutional acceptance have not gone unnoticed and, in turn, have reinvigorated crypto’s potential as a mature and viable industry—even in sectors once considered more superficial.

One example that comes to mind is NFTs, which have truly gone through the wringer of public perception even when they were a popular fixture in the blockchain and web3 space. Sure, you now have major companies like EA Sports and Nike utilizing NFTs in gaming and loyalty programs, but you also have NFTs popping up through companies embodying new technologies. 

For example, a startup like ChainGPT implements generative AI technology for users to create NFTs themselves and make the technology more accessible, partnering up with Polygon Labs in the process. It also extended its AI capabilities to partner with Binance for its news service, utilizing AI to combat the fake news and bot epidemic in crypto communities. While it’s not exactly in the same vein as Citi or HSBC tokenizing gold, it does demonstrate how projects can legitimize themselves by being more willing to evolve.

While crypto and blockchain might not feel as freewheeling as they used to be, to the chagrin of its early enthusiasts and staunch purists, their appeal to institutions has given the industry much-needed stability and legitimacy. By wisening up and tailoring their technology to function in areas that people genuinely need it for, blockchain projects have a rare opportunity to cement themselves as infrastructural pillars for a new financial and technological reality.

Even if the industry is less glamorous and meme-heavy than before, it’s worth the trade-off for long-term sustainability and growth to eventually reach widespread mainstream acceptance. As long as its core tenets are still intact, blockchain grants the potential for traditional institutions to realize products and financial services through a new lens—and even extend its usability beyond the financial realm.

Now, it’s up to projects and institutions alike to maintain the positive momentum.