A World Federation of Exchanges survey found that 41% of the participating trading venues already offer crypto-related services or products.
Furthermore, according to the survey results published on Sept. 5, 24% of the platforms without such offerings plan to offer crypto-related products or services. The study was focused on cryptocurrency trading infrastructure and included comments from 29 trading venues.
While most platforms already offer crypto products or services to their customers or plan to, over a third do not have such plans. The World Federation of Exchanges also found that the demand for crypto products is greater among retail investors than institutions.
Furthermore, retail investors are more interested in products such as non-fungible tokens (NFTs) and stablecoins — whereas institutions tend to request security tokens and custody services. Over one quarter (26%) of the respondents also expect cryptocurrencies to go mainstream within five years.
Crypto custodians
Despite cryptocurrencies being more prevalent among retail traders than institutional investors, institutional crypto services are still developing. One crucial aspect of institutional involvement in the crypto market is custody services.
Custody refers to the safekeeping and storage of digital assets on behalf of clients. In the early days of crypto, individuals were responsible for securing their digital assets through wallets and private keys. However, this approach was unsuitable for institutional investors who required a higher level of security while sharing the key for automating transactions and ensuring regulatory compliance.
To address this demand, companies like Bakkt and Anchorage stepped in to provide institutional-grade custody solutions. These custody providers offer secure storage of digital assets, employing advanced security measures such as multi-signature wallets, cold storage, and insurance coverage. Institutional investors can mitigate the risk of theft or loss by entrusting their assets to reputable custodians and ensuring compliance with regulatory requirements.
Institutional crypto exchanges
In addition to custody services, the evolution of crypto institutional services also includes the development of specialized exchanges. Traditional cryptocurrency exchanges primarily catered to retail investors, but as institutional interest grew, the need for dedicated platforms emerged. These institutional exchanges offer features like higher trading volumes, advanced order types, and compliance with regulatory standards.
Institutional exchanges provide a secure and reliable environment for investors to trade cryptocurrencies. They often implement robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures to ensure compliance with regulatory frameworks. Furthermore, these exchanges may offer additional services, such as over-the-counter (OTC) trading desks, facilitating large-volume trades for institutional clients.
The evolution of crypto institutional services has been driven by regulators and financial institutions’ increasing recognition of cryptocurrencies as a legitimate asset class. As more regulators warm up to cryptocurrencies, institutional investors gain confidence in entering the market. This has led to a surge in demand for services that cater specifically to their needs, such as custody and exchanges.
Overall, developing crypto institutional services has provided a more secure and regulated environment for institutional investors to participate in the crypto market. These services have played a crucial role in facilitating the institutional adoption of cryptocurrencies by offering robust custody solutions and dedicated trading platforms. As the industry matures, we expect further advancements and innovations in crypto institutional services.