Regulatory Easing

The initial shift in the digital asset and crypto landscape is marked by regulatory approvals that allow major institutions to concentrate on enhancing the safety infrastructure for these assets rather than debating their acceptability. There has been significant advancement in building robust foundational systems, but regulators can still provide clearer guidelines to enhance confidence and participation among leading crypto players.

Interoperability

“An important next step is ensuring that different blockchains can communicate with each other,” stated Joel Hugentobler, Cryptocurrency Analyst at Javelin. Currently, blockchain networks operate in parallel; sending Solana to a wallet requires an address on the same Solana network. Achieving interoperability by enabling transfers across platforms will significantly reduce operational complexities.

Blockchain Multiplicity

The future of digital assets and crypto involves various blockchains, each offering unique benefits such as transaction speed or consensus mechanisms. Banks might prefer cheaper options like Solana for everyday transactions and opt for more complex networks like Avalanche due to their Byzantine fault-tolerant consensus.

Challenges for Custody Holders

Custodians face significant changes, particularly with the surge in crypto ETFs. While Coinbase has been dominant, other financial institutions are likely to step in as custodians due to reduced reputational risks.

Embedded Delivery
The next phase for the crypto industry is embedding delivery services beyond basic asset custody. This includes integrating with trading exchanges, payment networks, and various settlement methods. Custody providers that fail to expand their service offerings may fall behind.

New Opportunities in DeFi
Financial institutions and hedge funds are exploring decentralized finance (DeFi) opportunities, requiring seamless integration with custody solutions for futures, options trading, and other advanced financial products.

Dangers of Falling Behind

Custodians who do not diversify their services may struggle. NYDIG, while a leader in Bitcoin custody, has stagnated without expanding its offerings. Meanwhile, others like Coinbase are broadening their suite with options platforms and Layer 2 networks.

The Rocketship Moment

Despite regulatory friendliness, Hugentobler sees some ongoing reputational risks for established financial institutions but expects these to diminish by the end of next year. Passage of the Digital Asset Market Clarity Act would significantly accelerate mainstream adoption and growth.