The 2024 U.S. election cycle, especially the emergence of Trump, the “first crypto president,” is undoubtedly the best propaganda standard for digital assets. As the dust settles on Trump’s second term, Bitcoin has broken through $70,000, $80,000, and $90,000 in the past half month, and is only one step away from the integer mark of $100,000.
Against this background, the global market's recognition of digital assets has increased significantly. Just imagine, if traditional funds with huge amounts of money begin to turn to Web3, then through what channels are these "Old Money" representing mainstream institutions and high-net-worth individuals most likely to deploy digital assets?
The wave of digital asset institutionalization spawned by the Trump deal
During the 2024 presidential election, Trump promised a series of policy measures to support Web3 and digital assets, including incorporating Bitcoin into national reserves and relaxing industry regulations. Although these may contain political bargaining chips, they undoubtedly provide an important reference framework for the direction of the digital asset industry in the next four years.
In the next four years, we can almost foresee the loosening of administrative, legislative, and regulatory levels under the "Trump Deal", especially in terms of market compliance and legality. In this way, the next four years will also become a key window for observing the institutionalization process of the digital asset market.
It is worth noting that as early as May 22, the (21st Century Financial Innovation and Technology Act) (FIT21 Act) was passed by the House of Representatives with a vote of 279 to 136. It aims to establish a new regulatory framework for digital assets. Once it is passed by the Senate, it will provide the industry with a set of enforceable and clear regulatory rules, greatly reduce regulatory uncertainty, promote the market legalization process, attract more institutional capital to flow into the digital asset field, and promote the institutionalization of digital assets.
Source: FIT21 Act
Against this backdrop, mainstream financial institutions and high-net-worth individuals around the world are gearing up for the action. Pennsylvania lawmakers Mike Cabell and Aaron Kaufer have introduced the Bitcoin Strategic Reserve Act and submitted it to the Pennsylvania House of Representatives, intending to allow the Pennsylvania Secretary of the Treasury to invest in Bitcoin and digital assets as well as crypto ETFs.
According to SoSoValue data, the daily trading volume of the US Bitcoin spot ETF exceeded US$5 billion several times after November 6, and exceeded US$8 billion on November 13, setting an 8-month high; in addition, the total trading volume of Hong Kong's three Bitcoin spot ETFs also exceeded HK$420 million in the same week, an increase of more than 250% month-on-month. Among them, the Bitcoin ETF launched by OSL in cooperation with China Asset Management (Hong Kong) and Harvest Asset Management reached HK$364 million, accounting for about 86%.
Image source: SoSoValue
However, unlike the small-scale traditional trading business for ordinary users, global institutional investors and high-net-worth individuals have stronger demands for compliance, security and efficient services. For them, the allocation of digital assets is not only a strategic shift in investment allocation, but also faces a tactical threshold of compliance and security.
Against this background, new ideas for the B-side are also quietly brewing, and some interesting new approaches are beginning to emerge. On November 18, Hong Kong licensed digital asset company OSL jointly announced the virtual asset ETF physical subscription service with Fosun Wealth Holdings and Hua Xia, intending to allow investors to use their virtual currency to directly subscribe to ETF products without having to sell the virtual currency for cash first.
This means that with the help of the blockchain infrastructure provided by OSL, Fosun can build a digital asset trading system with strict KYC/AML processes and intelligent risk control, allowing institutional investors or high-net-worth users to directly convert the purchased BTC and ETH into corresponding ETFs within the compliance framework, which will be managed by professional custodians such as OSL, thereby enjoying the advantages of secure custody, insurance protection and compliance.
In short, service providers that can provide compliant, secure and transparent digital asset management, trading and payment solutions will become the core focus of market competition, which also means that the opportunities for To B service providers are undoubtedly huge - the demand for digital asset allocation by financial institutions and high-net-worth clients will greatly promote the development of related services, especially in the fields of digital asset custody, OTC trading, asset tokenization and payment finance.
The To B service market is on the eve of an explosion, and all parties are stepping up their layout to gain market opportunities. So how will the new demand for digital assets reshape the entire industry?
What are the key demands facing the institutionalization of digital assets?
We can break down the core pain points and needs of “Old Money” entering the digital asset market. For traditional financial institutions and high-net-worth individuals, it can be divided into four main areas:
Comprehensive compliance solutions for financial institutions (Omnibus), real asset tokenization (RWA)/asset on-chain, custody/OTC services, and PayFi solutions.
1. Comprehensive compliance solution for financial institutions (Omnibus)
First of all, traditional financial institutions. Since this year, both virtual asset ETF-related service providers and traditional retail brokerage firms have entered the digital asset trading market. More and more investors, financial institutions, listed companies, family offices, etc. have also begun to actively consider allocating digital assets through compliant channels.
However, for these institutions, entering the digital asset field is not easy. The biggest pain point lies in deployment time and cost. Compared with traditional financial products, the decentralized nature and technical complexity of digital assets mean that institutions need longer time to complete system integration, risk management and compliance framework construction.
In particular, building a compliance system that meets regulatory requirements (especially KYC and AML frameworks) not only requires a large amount of technical resources and financial costs, but also requires responding to the rapidly developing market dynamics and ever-changing compliance requirements of crypto assets. This high time and cost consumption is often the main obstacle to institutions entering the digital asset market.
Therefore, if there is a solution that can help financial institutions quickly connect to compliance frameworks and tools, and provide customers with compliant and secure digital asset trading services to meet diverse investment needs, it will undoubtedly open the door to the digital asset market for these institutions.
Taking OSL, the current compliant exchange in Hong Kong, as an example, the full set of compliance solutions (Omnibus) it provides to the outside world includes strict review of assets and transactions, a complete KYC and AML system, an asset security mechanism for hierarchical management of private keys, etc., which can greatly lower the threshold for institutions to enter the digital asset market.
At the same time, this "professionalism + security" division of labor and cooperation model not only fully leverages the advantages of traditional financial institutions in customer service and marketing, but also relies on the expertise of licensed institutions in compliance, technology and risk control to complement each other's strengths, promote the deep integration of traditional finance and the digital asset ecosystem, and provide solid support for the institutional development of digital assets.
2. Real World Assets (RWA) Tokenization/Assets on-chain
Although traditional assets such as stocks, bonds, and gold already have high liquidity in the financial market, their trading is still limited by problems such as long settlement cycles, complex cross-border operations, and lack of transparency. Non-standardized assets such as artworks and real estate have long faced challenges in liquidity and trading efficiency.
Asset tokenization can not only improve liquidity, but also significantly improve transaction transparency and efficiency. BlackRock CEO Larry Fink said, "Tokenization of financial assets will be the next step in future development." It can not only effectively Prevent illegal activities and more importantly enable instant liquidation, significantly reducing settlement costs for stocks and bonds.
According to the latest data from the RWA research platform rwa.xyz, the current total RWA market size exceeds US$13 billion, and BlackRock's forecast is more optimistic. By 2030, the market value of tokenized assets is expected to reach US$10 trillion, which means that the potential growth space in the next seven years may be as high as more than 75 times.
Although enterprises and financial institutions have seen the potential of asset tokenization, the technical threshold is high. Converting traditional assets into on-chain token assets requires comprehensive technical support and compliance guarantees. At the same time, there are also considerable challenges in terms of liquidity, legal compliance, and technical security.
In this context, as the underlying infrastructure, licensed digital asset platforms can provide innovative support for traditional financial giants to enter the RWA tokenization, and will also directly benefit from the hundreds of billions of dollars of untokenized liquidity in the traditional financial system, which can be introduced onto the chain in the form of RWA (Real World Assets) through a compliant, secure and transparent mature architecture, thus completely releasing its liquidity.
3. Custody/OTC Services
When high-net-worth clients and institutional investors consider digital asset investments, they are always most concerned about the security and liquidity of the assets - such as asset losses caused by hacking attacks or operational errors, as well as the lack of market liquidity when dealing with large transactions. , which may result in transaction delays or significant price slippage, thereby affecting asset allocation efficiency.
According to Finery Markets statistics, in the first half of 2024, the volume of OTC digital asset transactions between institutions increased significantly, up more than 95% from the same period last year. The growth rate accelerated in the second quarter, with customer trading volume increasing by 110% year-on-year (80% in the first quarter).
Although the volume of digital asset OTC is still hovering around tens of billions of dollars compared to the trillions of dollars in trading volume of centralized exchanges (CEX), the flexibility and confidentiality of OTC transactions meet the needs of investment institutions for large-scale digital asset allocation. With the gradual improvement of supervision, it is expected to attract more investors to participate and further promote the growth of its market volume.
In this context, institutions need to have a service system with high security, high efficiency and high liquidity to meet their needs in the field of digital assets: on the one hand, they need to ensure the security of large-scale assets in the storage and transaction process; on the other hand, they need to ensure the security of large-scale assets during storage and transactions; On the one hand, an efficient over-the-counter (OTC) network not only needs to meet the flexibility and privacy needs of large-value transactions, but also needs to rely on blockchain technology and bank networks to achieve rapid settlement and significantly shorten the transaction cycle.
In addition, deep liquidity support is also indispensable. By integrating market resources and institutional networks, it provides stable prices and diversified trading options, helping institutions to smoothly enter the digital asset market.
4. Payment Finance (PayFi) Solutions
With the popularization of digital assets, the demand for digital asset payments from enterprises and merchants has gradually increased, especially in areas with limited traditional banking infrastructure and in cross-border payment scenarios. Digital assets can provide convenience and efficiency through low-cost financial services and are considered to be a viable solution to these challenges.
However, the complexity and potential risks of digital asset payments have made many traditional companies hesitant. For companies that want to support digital asset payments, the biggest problem lies in the complexity and compliance of the payment process. At the same time, the exchange of fiat currency and digital assets involves exchange rate fluctuations, tax issues, and regulatory restrictions in different countries. These factors increase the difficulty and cost of payment.
In short, enterprises and merchants need a backend system that can seamlessly integrate fiat currency and digital asset payments, which can not only reduce exchange costs but also ensure the compliance and security of the payment process; at the same time, in order to meet the needs of cross-border business, payment solutions must also support multi-currency payments and settlements.
Compliant digital asset platforms such as OSL actually have a natural advantage in expanding these businesses. They can provide enterprises with a complete set of PayFi solutions through technical and compliance support to help them cope with complex challenges in the payment field:
First, such platforms support seamless and instant exchange of fiat currency and digital assets, and can realize multi-currency payment settlement on a global scale, simplifying the cross-border payment process; secondly, platforms like OSL maintain good cooperative relations with banks, which can at least ensure the compliance and stability of the payment process, avoid risks such as frozen cards, and provide enterprises with a reliable operating environment.
Through the above key services, traditional institutions can enter the digital asset market efficiently and safely, while lowering the threshold for participation. This service system not only solves the core pain points of asset security, liquidity, transaction efficiency and investment optimization, but also provides comprehensive support for the strategic layout of institutions in the digital asset ecosystem.
Digital asset industry variables that compete for institutional services
According to the latest statistics from Bank of America, the total market value of the global stock and bond markets is approximately US$250 trillion, and the overall size of other asset classes including real estate, art, gold, etc. is even more difficult to estimate - the global gold market size is estimated to be US$13 trillion, and the global commercial real estate market is valued at nearly US$280 trillion.
In comparison, Coingecko data shows that the total market value of the global digital asset market is approximately US$3.3 trillion, which is only equivalent to about 1.3% of the global stock and bond market, while the total size of emerging tracks such as asset tokenization (RWA) is only US$13 billion, which is almost insignificant in the entire financial market.
Image source: Wall Street Journal
Therefore, for Web3 and the world of digital assets, 2024 is destined to be a milestone in history - the crypto asset layout of enterprises and institutions gradually moves from the exploration stage to the deep integration stage, and the market space for To B services expands significantly, becoming the next growth engine to drive the development of the industry. This not only means that more companies and institutions are beginning to take digital asset allocation seriously, but also indicates that digital assets will be further integrated with the traditional financial system.
This is especially true for traditional institutions and financial giants, which have a huge user base and huge amounts of capital. Once these resources are successfully bridged, they will inject unprecedented "incremental funds" and "incremental users" into Web3, promote the rapid rise of "New Money" in the digital asset ecosystem, and accelerate the mainstream application of blockchain technology.
In this context, whoever can connect the traditional funds and massive users of Web2 giants will be expected to become the key infrastructure linking Web2 (traditional finance) and Web3 (digital asset finance), and achieve a comprehensive breakthrough with the strong support of traditional funds.
In this process, the role of To B service providers is crucial, especially those market participants with compliant, secure, efficient and diversified service capabilities, who are expected to reap huge development dividends from this wave of institutionalization.
Taking OSL, the first digital asset platform to obtain SFC and AMLO licenses, be listed, audited by one of the Big Four accounting firms in Hong Kong, underwritten and SOC 2 Type 2 certified, as an example, institutions consider adopting a service because it usually meets the following core conditions:
● Compliance and security: Service providers need to strictly comply with regulatory requirements and have a sound KYC and AML system to ensure the legality and transparency of capital flows. Compliance is the primary condition, especially when funds flow across borders into the digital asset market;
● Diversified and customized service capabilities: Institutional clients not only need trading services, but also comprehensive capabilities covering areas such as asset tokenization, custody, and OTC trading to achieve full-link support for asset allocation and management;
● Efficient technology integration capabilities: With a modular system architecture, it can quickly deploy digital asset trading and management functions for traditional institutions, lower the threshold for technology access, and improve service response efficiency;
● Industry experience and cooperation network: We have rich industry practice experience and extensive ecological partnerships to quickly respond to market demand, provide customized solutions for institutional clients, and accelerate their digital asset layout;
This means that with the rise of To B services in the digital asset market, the importance of licensed exchanges has become increasingly prominent. It can be said that they are standing at the forefront of the new era and holding the "lifeline" of various businesses - whether it is a company incorporating virtual asset ETFs into its investment portfolio, or trading and custody of virtual assets such as Bitcoin and Ethereum, licensed exchanges provide vital support.
summary
If “Web3 in 2024 is Web2 in 2002,” then now might be a good time to get started.
As enterprises and institutions deepen their digital asset layout, To B service providers are standing at the core stage of the digital asset market. Whoever can meet the diversified needs from compliance to trading, from tokenization to payment finance will become a key player in defining the next generation of financial ecology.
In particular, licensed exchanges such as OSL, with their all-round and multi-level service capabilities, are expected to further enhance their importance in the wave of digital asset institutionalization, especially in playing the role of "bridge" and "infrastructure" to efficiently introduce existing assets in the traditional financial market into the on-chain ecosystem and release their potential value.
The wind starts from the tip of the green reed. After the dust settles in 2024, Web3 and the crypto industry may really enter a new cycle.
