Inflows into digital assets from firms are at an all-time high, but it’s still extremely difficult to persuade holdouts to get off the bench.
At the Decrypt and Yahoo Finance Crypto Goes Mainstream event in Brooklyn yesterday, Giorgi Khazaradze, the CEO and founder of crypto trading terminal Aurox, and Glenn Barber, the head of sales at institutional crypto trading platform Copper, discussed what’s keeping institutions out of crypto markets.
One thing they all agree on is that regulations, or the lack thereof, continue to be a major concern for enterprises on the sidelines.
“It would be nice if the United States government, or anyone in that regulatory capacity, would come out and establish a framework which, in our minds, should be unique and different in that we’re talking about an asset class that is global, permissionless, borderless, 24/7, 365,” Barber said. “I think that if we took a much more open architecture approach to the regulatory framework and didn’t try to put a round peg through a square hole, we’d be in better shape.”
Copper, based in London, has been keeping a close eye on it. The firm has been posting monthly roundups on its blog to keep track of what’s going on in each location.
“It is really about the regulation. I mean, taking a risk and investing in tokens on decentralized exchanges—there is no safety net,” said Aurox’s Khazaradze. “And an institution is not going to take that risk.”
It’s a problem that has arisen in the past for other businesses. FTX CEO Sam Bankman-Fried stated earlier in the day that the onboarding process for institutions can take a long time as they figure out how to join without running afoul of regulations.
“It’s going to take a year for many of these places. Sometimes multiple years,” he said. “The amount of work a compliance department has to do to become acquainted with the cryptocurrency ecosystem and get comfortable is fairly significant for a lot of these players.”
The knowledge gap is another reason why companies have stayed out, according to Khazaradze. Aurox has attempted to solve this with its retail users with promotions like a $200,000 “Learn & Earn” campaign that will run on CoinMarketCap through November 24.
The company is banking that establishing a name among retail traders would lead to increased brand recognition among institutional clients.
“Retail investors alone will not be able to fuel this market,” Khazaradze warned. “Institutions can speed up the adoption process and do everything else, but they need to feel safe before they get involved.”