Competing for Institutional Capital: Why Crypto Funds Must Meet TradFi’s Operational Standards
Crypto-native players face a turning point. With new regulations in the U.S. and forward-looking frameworks emerging in Asia Pacific, they have new opportunities to offer products that can tap the massive pool of traditional AUM. But doing so raises serious questions about what it takes to compete for that capital. What crypto-native players need to realize is that institutional capital imposes TradFi-like operational standards that come with meeting more traditional demand.
Where the collision happens
Crypto-native platforms have built comprehensive front-to-back systems for digital assets that can include more traditional instruments. Meanwhile, TradFi platforms have been expanding to support crypto assets within their existing infrastructure. With both sides racing to prove they can handle the full spectrum of assets, they’re setting themselves up for direct competition for the same institutional clients.
“We think this combination of regulatory clarity and technological innovations will drive a transformative year for the crypto market in 2026. This is the foundation on which the next phase of institutional adoption is being built.” — Coinbase Institutionali
Bringing an optimistic view like Coinbase’s into reality is precisely what raises the operational stakes. For crypto-natives, the challenge is that these clients apply their operational standards to all investments, regardless of asset class. They expect proven, robust technology platforms that handle front-, middle-, and back-office functions without creating new operational risks. Boards and stakeholders need confidence that systems won’t fail during critical market moments or regulatory reviews.
Culture and regulation create additional friction points. For instance, communications compliance represents a particularly stark difference. Crypto teams typically operate through unmonitored channels like Telegram, while TradFi firms monitor all communications for compliance and legal review.
What causes the collision
The collision between crypto-native platforms and TradFi can be lopsided between these types of players. Each ecosystem struggles to replicate the other’s strengths quickly. Understanding where each side falters reveals why competition will intensify.
These points of friction show why neither side can easily absorb the other. That means TradFi platforms with institutional expertise face product development challenges in adding crypto capabilities. And conversely, crypto-native platforms need to rebuild their operational foundations to meet decades-old institutional allocator standards.
How allocators see legitimacy and risk
Institutional allocators evaluate the entire front-to-back stack before committing capital. They expect platforms that handle trade capture, position management, and risk assessment, and that produce accounting reports suitable for direct stakeholder review. The trading layer is one component. Governance infrastructure, audit trails, and compliance records carry equal weight in the due diligence process.
More conservative allocators need to meet additional criteria. For example, pension funds, endowments, and similar institutions are risk-averse, but they still have a fiduciary duty to grow assets. That could mean allocating 5% or 10% into crypto, while managing risk within their existing frameworks. Their institutional thresholds mean that they favor recognizable TradFi methodology, protocols, platforms, and compliance over less mature crypto-native managers who are potentially unfamiliar with securities law requirements. They don’t really have a choice, so the winners execute in crypto while operating within TradFi rigor and boundaries.
“Institutional investors are primarily asset allocators, and to allocate to a new class of assets, they’re looking for a reasonable amount, preferably a decade or two, of reliable data about volatility and correlation. And we’re very young in that cycle.” — Donald Putnam, Grail Partnersii
What you might not expect in the due diligence process is how many platform choices send signals about operational maturity for institutional needs. The right platform choice preemptively answers questions about controls, governance, and audit trails before allocators need to ask them.
Mapping platform infrastructure to recognizable TradFi categories matters because conservative institutions need to justify crypto allocations to their boards and stakeholders. If the underlying infrastructure maps to recognizable TradFi categories, those conversations become straightforward. If it doesn’t, every board presentation and compliance review becomes an education session on why the operational model still meets fiduciary standards.
Where TradFi infrastructure sets the bar
TradFi platforms stand out because they’ve built breadth across asset classes, from securities lending, structured products, and synthetics to credit instruments, where a lot of innovation is concentrated. Structured credit, mortgage-backed and asset-backed securities (MBS and ABS), and private credit represent the complex edge of traditional finance. Technology platforms built for TradFi managers dominate this space with models built over many years.
Crypto platforms have built genuine product depth with instruments that have no direct equivalent in traditional markets: staking, restaking, liquid restaking, maximal extractable value (MEV), and options and futures built specifically for on-chain mechanics. The accounting challenge is that these instruments look familiar enough to suggest they fit existing TradFi frameworks, but the similarity quickly falls apart.
Staking is a great example. It looks straightforward on paper. If you park assets for a period, you earn yield, just like an interest-bearing deposit account. From a recordkeeping perspective, it maps cleanly to existing frameworks, and the concept makes sense to TradFi players. But the mechanics work differently. Assets lock in place, but you designate upfront where they’ll be sent if automatically withdrawn due to what is called slashing. Rewards automatically transfer to a specified address periodically.
Many other on-chain concepts translate into TradFi terms, but only at a surface level. The operational divergence begins as soon as accounting standards are applied. When crypto-native managers try to apply TradFi accounting standards to these products, their models break. Crypto options and futures present a similar problem. The instrument design doesn’t map to frameworks built for traditional markets.
Institutional allocators are measuring for exactly what falls into that gap. TradFi platforms set the bar because they’ve built the required accounting rigor across asset classes. Their expertise with structured credit, synthetics, and other private instruments can translate into accounting models for crypto’s innovations.
But crypto-native platforms still have to build frameworks to translate their new products into the accounting standards that hedge funds, pensions, endowments, and other institutional investors demand. Accounting for novel crypto products requires the kind of institutional-grade frameworks that TradFi built over decades. When crypto-native managers can’t produce that level of reporting, they face a due diligence problem that performance track record alone won’t resolve.
Preparing for the collision
The collision scenario resolves into two paths for crypto-native managers pursuing institutional capital. Some will pursue multi-asset expansion, adding traditional instruments to reach allocators who want diversified exposure. Others will stay exclusively in crypto while building TradFi-grade governance, accounting, and compliance infrastructure. Both paths require the same foundational investment in institutional-grade operations. The difference is in product scope.
Senior leaders at crypto-native firms looking at TradFi should consider three main operational questions:
- Which path fits your institutional investor targets: multi-asset expansion that broadens the portfolio, or crypto-only operations built around TradFi governance and reporting standards?
- Can your current platform produce the accounting, audit trails, and compliance records that institutional allocators require before committing capital?
- How much runway do crypto-native managers have before TradFi incumbents with established institutional relationships build credible crypto capability?
Authored By
Phillip Silitschanu
Phillip Silitschanu leads Arcesium's global digital asset commercial efforts as Senior Vice President, Digital Assets. Phillip is an expert and thought leader in the FinTech, blockchain, cryptocurrency, and digital assets space, known for his work as the research director leading IDC’s (Blackstone) global blockchain practice, and in various strategic roles within the financial services industry. He has authored and co-authored numerous whitepapers, reports, and books on these topics and is a recognized speaker and expert cited by major media outlets like the Financial Times and CNBC.
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[i] As reported in MarketsMedia, 2026. https://www.marketsmedia.com/digital-assets-to-absorb-parts-of-traditional-finance/
[ii] As reported in Institutional Investor, 2025. https://www.institutionalinvestor.com/article/states-texas-bet-bitcoin-most-pensions-still-arent-playing
