Why Crypto is Going from Marginalized to Institutionalized in 2026

After two years, blockchain champions have finally been afforded a measure of regulatory clarity as a crypto-friendly US administration has released an executive order, guidance statements, “no-action letters”, and proposed legislation: the GENIUS Act and CLARITY Act. Most recently, the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) announced in March a Memorandum of Understanding (MOU) to guide coordination and collaboration between the two agencies to support lawful innovation, uphold market integrity, and ensure investor and customer protection.ⁱ So, does this signal that finance is moving toward a hybrid model, with traditional financial services (TradFi) and decentralized finance (DeFi) beginning to merge? Do these developments pit DeFi against TradFi in the long run competition for blockchain products? Will there be a complete absorption of DeFi by TradFi, complete on-chaining of TradFi, or will they coexist in various structures?

The age of the token is upon us in investment management. For the immediate future, the question for institutional investors and asset managers will be to what extent they should build institutional crypto infrastructure and how these DeFi business lines might affect overall portfolio strategies and reshape risk, collateral, liquidity, operations, and data management.

Regulators unlock gates to on-chain strategies

TradFi institutions have historically avoided crypto because they require clear black and white rules to operate. Some regulatory guidelines have advanced the cause of on-chain activity. The GENIUS Act established a framework that facilitates the use of tokenized assets within the stablecoin ecosystem, like MMFs, short-term US Treasury bills, notes, or bonds. The New York Stock Exchange recently announced it is seeking approval to create a 24/7 tokenized securities platform for trading of stocks and ETFs as digital tokens on a blockchain.ⁱⁱ DeFi protocols will be used to tokenize assets for lending, borrowing, and yield generation.

Some prominent blockchain cheerleaders are forecasting that the market value of tokenized real-world (RWA) and financial assets will reach up to $400 billion by the end of 2026.ⁱⁱⁱ This is astonishing growth compared to the current estimates of $35 billion AUM, mostly dominated by US Treasurys and private credit. The streamlining of traditional asset management transaction processes, eliminating intermediaries and reducing related costs and inefficiencies? Will DeFi actually swallow up TradFi in the long run?

A recent BeInCrypto article rightly observed, “Tokenization alone does not constitute a competitive advantage. The true differentiator lies in whether it delivers measurable improvements across reserves, trading, or settlement.”^iv

Is crypto going from marginalized to institutionalized?

Spot Bitcoin ETFs are all the rage as total AUM has well eclipsed $100 billion after topping out in October at $162 billion, led by BlackRock’s iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin Fund, and Franklin Templeton’s Bitcoin ETF, and all these asset managers are doing business elbow to elbow with crypto-native Grayscale.^v The sell-side has gotten wise now, too, switching from distributor to issuer. In March, Morgan Stanley filed with the SEC to launch Morgan Stanley Bitcoin (BTC) Trust (MSBT). If approved, Morgan Stanley would be the first major US bank to issue a spot Bitcoin ETF so they can capture management fees directly. JPMorgan projects that pension funds and endowments could drive up to $130 billion in annual inflows into regulated crypto products during 2026.^vi

Crypto complicates firms’ fragmented systems

Meanwhile, crypto-native firms have raced ahead, unencumbered by oversight, innovating and getting faster and more technologically advanced. TradFi has historically innovated through investment strategies (e.g., algorithmic trading, co-location) using existing security types like equities and bonds. In contrast, DeFi tends to innovate at the product and security layer, inventing entirely new asset classes and financial instruments.

Worlds colliding: Crypto and TradFi

Blockchain companies have the plumbing for crypto. Traditional asset managers cannot say the same. On March 24, Invesco inked a deal to use Superstate's digital transfer agent infrastructure to become investment manager of Superstate Short Duration US Government Securities Fund (USTB).^vii On March 25, Franklin Templeton announced its partnership with Ondo Finance, whose Ondo Global Markets platform will host the tokenized stocks and ETFs, Franklin’s investment products.^viii Crypto native firms like Fireblocks, Securitize, Coinbase, Anchorage, and Chainlink are filling their dance cards with partnerships and platform relationships with asset managers. Conservatively speaking, perhaps 40-50 asset management firms now have deals with blockchain providers. Because crypto moves so fast, crypto-native firms often lack the compliance and middle-office pedigree of TradFi. Conversely, TradFi firms lack the agility of crypto players. These collaborations have created a demand for modern data platforms that bridge both worlds, providing the modeling tools of a top-tier asset manager with the flexibility of a crypto-native stack.

Operational risk in the TradFi-DeFi asset mix

The difference between the operations in crypto and TradFi is, in a word, speed. Blockchain trading does not need to funnel transactions in and out, through broker-dealers, custodians, exchanges, and clearinghouses. Crypto trading is 24/7/365. The idea of round-the-clock trading brings up many questions, ranging from liquidity and risk management to data pipelines and operational infrastructure challenges. Crypto operations require support for extreme precision, such as tracking assets to several decimal places, and handling unique cost structures like gas (transaction) fees and negative commissions for market makers. The CFTC cautioned that risks in trading 24/7 “may create an elevated, or at least different, need for liquid resources. This can make rapid shifts in prices, and thus rapid shifts in portfolio values, more likely in a case where large directional flows exist.”^ix The firms venturing into crypto will need to solve for yet another dimension of operational complexity.

Data fragmentation meets blockchain complexity

Same-day settlement and 24/7 trading will require hyper-vigilant counterparty risk management, the ability to record complex lifecycle events, and calculate profit and loss granularly on both a historic and intraday basis. This calls for all relevant systems to be updated continuously, which relies on precise, real-time data flows.

The integration of tech platforms to launch digital asset lines is exacerbating the existing problem of systems fragmentation. Further, firms need to worry about how these alternative asset classes might make it even more challenging to get a clean, instant total house view of the portfolio. Managers eager to get in on the crypto action will need to deploy upgrades or new interfaces to ensure systems can handle blockchain-based transactions. As tokenization gains traction, scalability becomes crucial to accommodate new structures and products.

Benefits of digital asset infrastructure for asset managers 

Trading assets on-chain could simplify recordkeeping and accelerate settlement times, but a foray into on-chain investment products will also spike transaction volumes. Many perceive clearing and settlement to be one of the most tangible benefits of distributed ledger transacting. Firms can trim their counterparty involvement, thorny reconciliation workflows, and associated costs, while also speeding things up.