Crypto Between Regulation, Institutionalization, and Client Adoption

Why Digital Innovation Is Reshaping Financial Markets

The debate around cryptocurrencies and digital assets has long moved beyond the niche. What began with Bitcoin more than a decade ago has evolved into a global transformation arena for banks, regulators, technology providers, and investors alike. The driving force is no longer technology alone, but the dynamic interplay between regulation, institutional adoption, technological maturity, and client demand.

This article examines how crypto technologies are becoming an integral component of the modern financial system – not as an alternative, but as a catalyst for innovation, efficiency, and market evolution.

1. Regulation – From MiCAR to Basel

MiCAR: A Unified Legal Framework for Europe

With the Markets in Crypto-Assets Regulation (MiCAR), the European Union introduced in 2023¹ the first supranational legal framework for crypto assets. Its objective is clear: to foster innovation while strengthening investor protection.

MiCAR eliminates the previous regulatory fragmentation among EU member states and establishes uniform requirements for three key categories:

• Asset-referenced Tokens (ARTs) – Stablecoins backed by a basket of currencies or other assets.
• E-Money Tokens (EMTs) – Stablecoins pegged 1:1 to a single fiat currency (e.g., EUR or USD).
• Crypto-Asset Service Providers (CASPs) – Entities offering custody, wallet, or trading services, including exchanges and custodians.

Basel: Capital Requirements for Banks

The Basel Committee on Banking Supervision (BCBS) redefined the capital treatment of crypto-asset exposures in its 2022/23 framework.²

• Group 2 Assets (e.g., Bitcoin) are classified as high-risk, carrying a 1,250% risk weight—effectively requiring banks to hold capital equal to their full exposure.
• Group 1 Assets (e.g., tokenized securities and regulated stablecoins) benefit from lower capital requirements, provided they meet strict stabilization and redemption criteria.

These standards establish clear parameters for banks, particularly in relation to stablecoins and tokenized instruments.

However, in August 2025, industry associations such as the Global Financial Markets Association (GFMA) and the International Swaps and Derivatives Association (ISDA) called for revisions, arguing that the current framework prevents banks from playing a stabilizing role in the digital asset market.

United States: Enforcement-First Approach

In the United States, regulatory progress follows an enforcement-first model. Rather than proactive legislation, the SEC and CFTC continue to shape the market primarily through litigation and enforcement actions.

Key examples include:

• Ripple (XRP) – Lawsuit alleging the issuance of unregistered securities.³
• Coinbase & Binance – Legal actions for operating unlicensed securities trading platforms.
• Initial Coin Offerings (ICOs) – Retroactive classification of many offerings as securities issuances.

Asia: Pragmatic and Sandbox-Oriented

Across Asia, regulators have adopted a pragmatic and innovation-focused approach, balancing market development with investor protection.

• Singapore: Operates a comprehensive licensing regime for digital asset exchanges and actively supports pilot projects for tokenized government bonds and payment systems.
• Hong Kong: Introduced clear licensing requirements that extend to retail investors, signaling a renewed ambition to position itself as a digital asset hub.
• Japan: A regulatory pioneer since 2017, now enforcing strict stablecoin regulations to ensure transparency and consumer protection.

Summary:

• EU/Asia = Regulation-first.
• U.S. = Enforcement-first.

2. Institutionalization – Banks and ETFs Enter the Crypto Market

Banks Step In

Major financial institutions are moving faster than in previous innovation cycles, unwilling to repeat the mistakes of the past.

Examples:

• P. Morgan: Onyx blockchain network and JPM Coin for wholesale transfers.
• Goldman Sachs: Platform for tokenized bonds.
• Deutsche Bank: Building crypto custody capabilities.
• BNY Mellon: Custody for Bitcoin and Ether since 2022./li>

Banks such as Baader or Raiffeisen are also investing in FinTechs like Tangany to expand expertise and market access.

Crypto ETFs – The Bridge to Traditional Finance

With U.S. Bitcoin spot ETFs, crypto has entered the mainstream. BlackRock, Fidelity, and ARK Invest now manage multi-billion-dollar crypto ETF portfolios. ETFs serve as a gateway for pension funds, insurers, and institutional investors restricted to regulated vehicles.

Custody – The Foundation of Trust

Institutional capital demands secure custody solutions, ranging from cold storage to multi-party computation.

Providers include traditional custodians (BNY Mellon, State Street) and crypto specialists (Coinbase Custody, Fidelity Digital Assets, Fireblocks).

3. Technology – Maturity, Tokenization, Smart Contracts

Blockchain Maturity

Early blockchains were slow, costly, and unscalable. New generations—Ethereum 2.0, Solana, Layer-2 solutions—have largely overcome these limits.

Interoperability is increasing, driven by standards like ERC-20 and ERC-1400, making blockchain infrastructure viable for banks and capital markets.

Tokenization and Commercial Bank Money Tokens (CBMT): Bridging the Traditional and Digital Financial Worlds

Tokenization merges traditional and digital finance. Pilot projects range from tokenized government bonds in Singapore and Hong Kong to BlackRock’s Ethereum-based money market fund. The EU’s DLT Pilot Regime further supports experimentation with digital asset trading and settlement.

To eliminate inefficiencies between on-chain assets and off-chain payments, the Commercial Bank Money Token (CBMT) project — led by the German Banking Industry Committee — brings commercial bank money onto DLT.⁴

CBMT remains a bank liability, fully fungible, and redeemable into deposits, requiring no additional risk management while enabling:

• Real-time 24/7/365 payments.
• Programmable transactions via smart contracts.
• Atomic settlement (Delivery vs. Payment).

The Bank for International Settlements (BIS) sees this as a path toward a “unified ledger” integrating assets and money on a single platform. Proof-of-concept pilots have tested multi-currency and interbank payments across Ethereum, Corda, and Hyperledger Besu.
A live pilot is now in preparation with ECB, BaFin, and Bundesbank involvement.

4. Client Demand – The Underestimated Driver

New Investment Forms

Investors seek diversification and yield. Bitcoin is viewed as digital gold, Ethereum as infrastructure. Tokenization opens access to previously illiquid asset classes such as private equity, infrastructure, or art.

24/7 Trading

Crypto markets operate without opening hours, matching the expectations of digital-native investors.

Faster, Cheaper Payments

Cross-border payments via SWIFT and correspondent banks are costly and slow.

Drivers:

• Retail: faster, cheaper remittances.
• Corporate: reduced working capital in global supply chains.

5. Implications and Outlook – Banks, Stablecoins, Efficiency

New Business Models in Digital Finance

Digitization enables new models that connect traditional market infrastructure with blockchain and DeFi. Example: BNY Mellon and Goldman Sachs now manage on-chain money market funds (MMFs) via LiquidityDirect and GS DAP, enabling real-time weekend settlements using USDC and tokenized U.S. Treasuries. Participants include BlackRock, Fidelity, and Goldman Sachs AM, testing 24/7 liquidity and instant collateral settlement.

Euro Stablecoins on the Rise

Germany’s BaFin-approved and MiCAR-compliant Eurau stablecoin enables on-chain euro transactions for treasury, B2B, and settlement use cases.

At the same time, nine major European banks—including ING, UniCredit, KBC, DekaBank, Danske Bank, SEB, Caixabank, and Raiffeisen—announced a consortium to launch a joint euro stablecoin from Amsterdam in 2026, aiming to strengthen Europe’s autonomy in payments.⁵

While the ECB warns of risks from private stablecoins and promotes a public digital euro, banks worry that a central bank digital currency could drain deposits.

FX Market Example – A USD 27 Trillion Opportunity

The global FX market trades over USD 7.5 trillion daily, yet remains inefficient. Correspondent banking ties up an estimated USD 27 trillion in idle capital, costing 3–5% annually.

In the long term, stablecoins may be a transition step toward fully on-chain FX systems, replacing correspondent banking and unlocking real-time, low-cost global value transfer.

Conclusion – From Niche to Mainstream

Crypto market dynamics are shaped by four forces:

1. Regulation creates clarity.
2. Institutionalization brings capital and trust.
3. 3Technology delivers maturity and scalability.
4. 4Client demand forces innovation.

Crypto is no longer a playground—it addresses real market and client needs.

The question is not if but who will lead: banks, FinTechs, or BigTechs.