Decentralisation was the hard sell for crypto in 2022. However, crypto's downfall last year has ultimately made way for the emergence of centralised finance aping into the industry. It's a bizarre twist of fate in that saw degens being muscled out of the spotlight by finance bros.
Over the past few weeks, TradFi has been making a compelling push into the crypto space, even to the despair of the SEC. BlackRock set the ball rolling with its Bitcoin ETF application. WisdomTree, Invesco, and Valkyrie Digital Assets filed similar applications with the SEC shortly after. Even HSBC, notoriously anti-crypto, announced its support for customers to trade cryptocurrency ETFs in Hong Kong.
The SEC has been on a relentless crypto purge, filing lawsuits against the likes of Binance and Coinbase. A total of 13 charges were filed against Binance entities and its founder Changpeng Zhao. The regulator also alleged Coinbase operated illegally without registering since 2019 and that it handled cryptocurrency transactions whilst evading disclosure requirements meant to protect investors.
Instead of the SEC's actions being regarded as a deterrent to crypto, TradFi firms found themselves even more drawn to the asset class; unregulated forbidden fruit was finally falling on their doorstep.
Even on an individual level, institutional investors are expressing an interest in digital assets. According to Binance's Institutional Crypto Outlook Survey, half of those surveyed said they are expecting to increase their allocation over the next year, whilst 63.5% are positive about the crypto outlook over the coming year. A whopping 88% are positive about their crypto outlook for the next decade.
Respondents were surveyed between 31 March and 15 May 2023, and comprised of a "diverse mix of global institutional investors with varying levels of AUM, and experience."
Infrastructure, L1 and L2 seem to be popular investment focuses for institutions, with 53.9%, 48.1% and 43.8% of respondents indicating the respective segment as key focus areas. 51.0% believe Wallet Innovation such as self-custody and MPC is an important area of focus.
Somewhat surprisingly, DeFi is also an incentive for crypto investment for institutional investors. Although 42.8% are drawn to the asset class for their ROI potential and 37.5% regard crypto as exposure to emerging technology, DeFi "seized the top spot as the most interacted category amongst respondents," according to the survey. Spot DEXes were the most utilized dApp in the past three months, followed by perps DEXes, lending, and LSD.