As traditional finance (TradFi) increasingly moves into the crypto space, tension is brewing between decentralization advocates and institutional giants.
Big names like Citadel Securities, Fidelity, and BlackRock are jumping in — with Citadel planning to become a crypto liquidity provider, Fidelity offering Bitcoin and Ethereum in retirement accounts, and BlackRock warning that the U.S. dollar could lose dominance to Bitcoin.
Many crypto purists argue that the arrival of major financial institutions threatens decentralization, one of crypto’s core principles. “When institutions enter the space and gain control over huge portions of the market, we lose all the benefits of decentralization,” some critics argue.
Many crypto advocates are not happy about this, for those who feel this way, BCB Group CEO Tim Renew has some advice. “Stop fighting over who’s right and learn to come together.”
One of the foundational aspects of Bitcoin and crypto as a whole is that it is decentralized. No one individual or entity can control it.
Michael Saylor, who owns nearly 2% of the total Bitcoin supply, cannot use his Bitcoin in any way that you and I cannot. When institutions enter the space and gain control over huge portions of the market, we lose all the benefits of decentralization, they say.
Renew believes that these fears are unjustified, even if they are understandable. “The two coming together has to happen, or it’ll stall,” he noted.
He also pointed out the benefits that having large institutions involved in crypto has and the lessons that both industries could learn from each other.
“We need to learn about regulation, accessing liquidity, and what TradFi has—like banks with so much money to put in. They have regulatory frameworks and can influence government policies,” he explained. “In traditional finance, money shuts down at 5 p.m. on Friday until Monday—that’s what they need to learn from DeFi.”
Institutional players are looking for ways to increase their exposure to crypto.
The roadblock for them has been ambiguous regulation of digital assets.
In the U.S. concerns around lawsuits and other legal repercussions have mostly been forgotten with the Trump administration taking power back and a change of leadership at the SEC, but there is still a lack of clarity around what is permissible and what is not.
As institutions grow their exposure, they can use their influence to help standardize regulations around the world for the industry.
“The more TradFi gets involved, the more it’ll have to standardize. You can’t scale global businesses to what big institutions want if you’re dealing with different regulatory climates and situations — some see crypto as a currency, others don’t. It’s all over the place,” he noted.
