Cryptocurrencies have been slowly making their way into traditional finance, with the recent approval of the first spot Bitcoin exchange-traded funds (ETFs) in the United States. However, the integration of digital assets into the banking sector and financial institutions is still limited.
The approval of the Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) marks a significant milestone, potentially leading to increased capital inflows and institutional participation in the crypto market. It’s worth noting that the SEC’s decision to approve the ETFs was long-awaited, as they had previously rejected multiple proposals over the past decade.
The involvement of large fund managers from the traditional finance world, such as BlackRock, and the resolution of legal actions surrounding Bitcoin ETFs contributed to the SEC’s approval. However, in a statement, SEC Chair Gary Gensler clarified that the approval of the ETFs did not mean an endorsement of Bitcoin itself.
Despite these developments, the crypto industry still faces challenges in gaining acceptance in the predominantly traditional finance world. Regulators have been skeptical of crypto projects, even those aiming to adopt industry standards. Bob Ras, co-founder of Coreum, experienced this firsthand during the development of Sologenic, a platform for trading tokenized stocks. European regulators posed numerous obstacles, leading Sologenic to offer tokenization solutions for institutions only, bypassing the need for a specific license.
Apart from regulatory hurdles, the separation between traditional finance and decentralized finance (DeFi) also stems from differing philosophies on how finance should operate. Sologenic initially ran on the XRP Ledger blockchain but later built Coreum, a layer-1 blockchain designed to comply with institutional demands. The team realized that there was no blockchain focused entirely on enterprises and compliant with banking standards like ISO 20022, AML, and KYC. Additionally, financial institutions are hesitant to embrace blockchain technology due to concerns about regulatory compliance.
To bridge the gap between traditional finance and blockchain, Coreum decided to provide administrative-level powers for regulated financial entities. However, changing the perception of crypto within the traditional finance sector remains a major challenge. The recent report by the European Central Bank on the possibility of a spot Bitcoin ETF in Europe reflects the skepticism that still exists.
While progress has been made in integrating cryptocurrencies with traditional finance, there is still much work to be done in gaining widespread acceptance.