According to CoinDesk, bear markets provide an opportunity for firms to build and position themselves for the next bull run. As a result, features that were once cutting-edge become standard in the next cycle. Crypto exchanges can no longer simply facilitate buying and selling cryptocurrency; they must evolve beyond being mere asset marketplaces, particularly with the rise of decentralized finance (DeFi). Instead, they should construct portals to an entire financial universe.
The opportunity is significant as Gen Z comes of age with crypto familiarity and eagerness to invest. A recent survey by the FINRA Foundation and the CFA Institute found that 44% of Gen Z investors started investing by purchasing crypto, while 32% started with stocks and 21% with mutual funds. Additionally, 65% of Gen Z investors use financial apps and pay attention to their guidance.
Crypto platforms offering 'investment as a service' can take cues from traditional finance giants like Vanguard to welcome the next generation to a home base for wealth development. However, early attempts in this area have been hindered by U.S. regulations, with crypto exchanges no longer able to offer debt-based yield services or retail-friendly staking services.
A compliant path forward involves proactively cooperating with the Securities and Exchange Commission and relying on robust custody partnerships, including tools like separately managed accounts. Direct indexing platforms are the next step to wide adoption of long-tail digital assets beyond bitcoin and Ethereum. Indexes allow for efficient asset allocation, risk management, product development, and performance measurement, enabling crypto to evolve into an institutional financial market.
Advisers will play a crucial role in simplifying Web3, managing client inventory, and maximizing yield with the inevitable proliferation of on-chain protocols, products, and decentralized apps. However, what is missing in the U.S. is regulatory support and index adoption that captures the more nuanced and differentiating aspects of crypto markets, such as proof-of-stake reward rates. While U.S. regulators are hoped to provide clear guidelines, innovation will continue with or without them.
