Wall Street firms will take on Binance, Coinbase and other crypto-native exchanges

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Traditional financial firms including Standard Chartered, Nomura and Charles Schwab are busy building or funding new crypto exchange and custody platforms, FT reported on May 31.

These well-known Wall Street firms are betting that fund managers are still interested in trading crypto, even after last year’s market downturn and series of crypto scandals.

The bankruptcy of FTX and the implosion of the Terra ecosystem, among others, have highlighted the risk of investing through largely unregulated exchanges. But traditional firms believe that asset managers prefer dealing with established players rather than crypto-native exchanges like Binance.

Gautam Chhugani, principal analyst of global digital assets at Bernstein, told FT:

Large, long-standing traditional institutional investors definitely prefer dealing with counterparties that they know have been around for years and are regulated in the traditional sense.

In a survey of 250 asset managers published by EY-Parthenon earlier this month, half of respondents said they would consider switching from a crypto-native group to a traditional firm if they offered the same services. Additionally, 90% of respondents trusted traditional financial groups to act as custodians of their crypto assets.

Traditional companies are trying to build more transparent platforms

The collapse of crypto firms last year and revelations about alleged wrongdoing have eroded crypto investor confidence.

Traditional financial companies rely on their expertise in the financial sector, their long-standing reputation and the lack of regulatory control to attract customers. The new wave of legacy crypto platforms will compete with Coinbase and Binance, which also host institutional clients.

But traditional financial firms will compete by implementing more transparent operations, in particular by separating exchanges from the custody of assets to avoid conflicts of interest and reduce risk.

It has been noted that BNY Mellon and Fidelity already operate separate crypto custody divisions, and the Nasdaq is waiting for regulators to greenlight its service.

Additionally, Jez Mohideen, CEO of Laser Digital, a crypto trading and venture capital firm owned by Nomura, said that some crypto exchanges do not provide the best execution or prices. He added that the involvement of traditional companies in crypto would create more transparency and more convergence in prices.

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