The Financial Times reports that leading investment banks such as Standard Chartered, Nomura, and Charles Schwab are venturing into the cryptocurrency space by establishing their own crypto platforms. This move comes as traditional financial institutions continue to witness the challenges faced by crypto-native companies over the past year, including bankruptcies and regulatory issues.

We have been witnessing this same trend in Switzerland since 2019, where forward-looking private banks such as Julius Bar and Banque Syz, enabled by advanced Swiss crypto-legislation, have already been leveraging their expertise in traditional finance to offer their own crypto-focused solutions, bridging the gap between digital and fiat finance systems for their clients.

However, while this shift signals a growing interest in crypto, a full embrace of cryptocurrencies is not yet complete. Even the most crypto-curious banks remain somewhat cautious due to regulatory concerns, reputation risks and continued market uncertainty. In some jurisdictions, they still need clearer regulations and guidelines surrounding cryptocurrency trading before fully committing to the market. Currently most offer to custody a limited array of cryptocurrencies, and their regulatory processes means that the instantaneous trading services offered by crypto-native exchanges are not achievable.

It is doubtful that the entry of established financial giants into the crypto market will disrupt the existing landscape dominated by platforms like Coinbase and Binance any time soon. Despite the dramatic implosions of crypto-exchanges and lenders like FTX and Voyager, crypto-native clients are still suspicious and untrusting of traditional finance institutions and unwilling to make compromises to 24/7 trading opportunities for more regulatory oversight. They are unlikely to trust these banks with their crypto assets, although will (sometimes reluctantly) use them when they wish to diversify their crypto portfolios into fiat assets.

Nevertheless, a sound market exists in the form of traditional asset managers, hedge funds, pension funds and family offices seeking exposure to or a deeper understanding of cryptocurrencies in a “safe” environment.  The continuous exploration and adaptation by both traditional financial institutions and agile private banks demonstrate the potential for a harmonious coexistence between traditional and crypto financial services. This evolution opens avenues for collaboration and innovation in meeting the diverse needs of investors in this rapidly changing landscape.