During the 2024 U.S. presidential election cycle, particularly with the emergence of 'the first crypto president' Trump, there is no doubt that he is the best publicity figure for digital assets—since the conclusion of Trump's second term, Bitcoin has continuously broken through $70,000, $80,000, and $90,000 in the past half month, just a step away from the $100,000 mark.
In this context, global market recognition of digital assets has significantly increased. Imagine if traditional funds with large volumes start shifting towards Web3; through which channels might these representatives of mainstream institutions and high-net-worth individuals, 'Old Money', most likely deploy digital assets?
'Trump Trades' Spark a Wave of Institutionalization in Digital Assets
During the 2024 presidential election period, Trump promised a series of policy measures supporting Web3 and digital assets, including incorporating Bitcoin into national reserves and relaxing industry regulations. Although they may carry political bargaining elements, they undoubtedly provide an important reference framework for the future direction of the digital asset industry over the next four years.
In the next four years, we can almost foresee a relaxation of administrative, legislative, and regulatory aspects under 'Trump Trades', especially regarding market compliance and legality. Thus, the next four years will also become a critical window for observing the institutionalization process of the digital asset market.
It is noteworthy that as early as May 22, the (21st Century Financial Innovation and Technology Act) (FIT21 Act) was passed in the House with a margin of 279 to 136 votes, aiming to establish a new regulatory framework for digital assets. Once it is also passed by the Senate, it will provide the industry with a set of executable and clear regulatory rules, greatly reducing regulatory uncertainty, promoting the legalization process of the market, attracting more institutional capital into the digital asset field, and driving the wave of institutionalization of digital assets.
Source: FIT21 Act
Against this backdrop, global mainstream financial institutions and high-net-worth individuals are gearing up, with Pennsylvania lawmakers Mike Cabell and Aaron Kaufer introducing a Bitcoin strategic reserve bill in the Pennsylvania House of Representatives, intending to allow the Pennsylvania State Treasurer to invest in Bitcoin, digital assets, and crypto ETFs.
According to SoSoValue data, the daily trading volume of the US Bitcoin Spot ETF has repeatedly exceeded $5 billion since November 6, with November 13 even surpassing $8 billion, reaching an 8-month high; additionally, in the same week, the total trading volume of three Bitcoin Spot ETFs in Hong Kong also exceeded HKD 420 million, with a month-on-month growth of over 250%, of which the Bitcoin ETF jointly launched by OSL and Huaxia Fund (Hong Kong) and Harvest International reached HKD 364 million, accounting for about 86%.
Source: SoSoValue
However, unlike traditional trading businesses aimed at ordinary users, global institutional investors and high-net-worth groups have a stronger demand for compliance, security, and efficient services. For them, the allocation of digital assets is not just a strategic shift in investment allocation but also faces a tactical threshold of compliance and security.
In this context, new ideas for B-end services are quietly brewing, with some interesting new approaches starting to emerge—on November 18, the licensed digital asset company OSL in Hong Kong announced in collaboration with Fosun Wealth Holdings and Huaxia that it would allow investors to directly subscribe to ETF products using their held virtual currencies without the need to first sell and liquidate the virtual currencies.
This means that with 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 purchased BTC and ETH into corresponding ETFs within a compliance framework, managed by professional custodians like OSL, thereby enjoying advantages such as secure custody, insurance protection, and compliance.
In short, service providers that can offer strong compliance and secure transparent digital asset management, trading, and payment solutions will become the core focus of market competition, which also means that opportunities for To B service providers are undoubtedly enormous—the demand for digital asset allocations from financial institutions and high-net-worth clients will greatly drive the development of related services, especially in areas such as digital asset custody, OTC trading, asset tokenization, and payment finance.
The To B service market is on the brink of explosion, with all parties accelerating their layouts to seize market opportunities. How will the new demands for digital assets reshape the entire industry's landscape?
What key demands does the wave of digital asset institutionalization face?
We can break down the core pain points and needs of 'Old Money' entering the digital asset market, which for traditional financial institutions and high-net-worth individuals can be mainly divided into four sectors:
Comprehensive compliance solutions for financial institutions (Omnibus), tokenization of physical assets (RWA)/asset on-chain, custody/OTC services, PayFi solutions.
1. Comprehensive Compliance Solutions for Financial Institutions (Omnibus)
First, traditional financial institutions, starting this year, whether it is virtual asset ETF service providers or traditional retail brokers, have all begun to enter the digital asset trading space. An increasing number of investors, financial institutions, listed companies, and family offices are also starting to actively consider allocating digital assets through compliant channels.
However, for these institutions, entering the digital asset space is not an easy task. The biggest pain point is deployment time and cost—compared to traditional financial products, the decentralized nature and technical complexity of digital assets determine that institutions require more time to complete system integration, risk management, and compliance framework setup.
Building a compliance system that meets regulatory requirements (especially KYC and AML frameworks) not only requires a significant investment of technical resources and financial costs but also needs to cope with the rapidly evolving market dynamics and ever-changing compliance requirements of crypto assets. Such high consumption of time and costs is often the main barrier preventing institutions from entering the digital asset market.
Therefore, if there is a solution that can help financial institutions quickly connect to compliance frameworks and tools, as well as provide clients with compliant and secure digital asset trading services to meet diverse investment needs, it will undoubtedly open the door for these institutions to the digital asset market.
Taking OSL, currently a compliant exchange in Hong Kong, as an example, its comprehensive compliance solutions (Omnibus) include strict review of assets and transactions, a complete KYC and AML system, and an asset security mechanism with layered management of private keys, which can significantly lower the barriers for institutions entering digital assets.
At the same time, this 'professionalism + security' collaborative model not only fully utilizes the advantages of traditional financial institutions in customer service and market promotion but also relies on licensed institutions' expertise in compliance, technology, and risk control, achieving complementary advantages that promote the deep integration of traditional finance and the digital asset ecosystem, providing solid support for the institutional development of digital assets.
2. Real World Asset (RWA) Tokenization/Asset On-Chain
Although traditional assets like stocks, bonds, and gold have relatively high liquidity in the financial market, their trading is still limited by issues such as long clearing cycles, complex cross-border operations, and insufficient transparency. Non-standardized assets like art and real estate have long faced challenges regarding liquidity and trading efficiency.
Asset tokenization not only enhances liquidity but also significantly increases trading transparency and efficiency. Larry Fink, CEO of BlackRock, stated, 'Financial asset tokenization will be the next step in future development.' It can effectively prevent illegal activities and, more importantly, enable instant settlement, significantly reducing the settlement costs of stocks and bonds.
According to the latest data from the RWA research platform rwa.xyz, the total market size of RWA is currently over $13 billion, while BlackRock's forecast is even more optimistic, predicting that by 2030, the market value of tokenized assets will reach $10 trillion. This implies a potential growth space of up to 75 times over the next 7 years.
However, although enterprises and financial institutions see the potential of asset tokenization, the technical barriers are high. Transforming traditional assets into on-chain tokenized assets requires comprehensive technical support and compliance assurance, while there are also significant challenges in terms of liquidity, legal compliance, and technical security.
In this broader context, as underlying infrastructure, licensed digital asset platforms can provide innovative support for traditional financial giants entering RWA tokenization, while also directly benefiting from the hundreds of billions of dollars of un-tokenized liquidity in the traditional financial system, introducing it on-chain through a compliant, secure, and transparent mature structure in the form of RWA (Real World Assets), thus completely unlocking its liquidity.
3. Custody/OTC Services
High-net-worth clients and institutional investors are always most concerned about the security and liquidity of assets when considering digital asset investments—for example, asset losses due to hacking attacks or operational errors, as well as issues of insufficient market liquidity during large transactions, which may lead to delays in trading or significant price slippage, thus affecting asset allocation efficiency.
According to statistics from Finery Markets, in the first half of 2024, inter-institutional digital asset OTC trading volume surged significantly, increasing by over 95% compared to the same period last year, with the growth rate accelerating in the second quarter, where client trading volume increased by 110% year-on-year (compared to 80% in the first quarter).
Although the volume of digital asset OTC trading still hovers around the tens of billions, compared to the trillion-dollar trading volumes of centralized exchanges (CEX), the flexibility and confidentiality of OTC trading meet the needs of investment institutions for large-scale digital asset allocations, and with the gradual improvement of regulations, it is expected to attract more investors to participate, further driving the growth of its market size.
In this context, institutions need a service system that is highly secure, efficient, and liquid to meet their needs in the digital asset space: on one hand, it must ensure the security of large-scale assets during storage and trading; on the other hand, an efficient over-the-counter (OTC) network needs to meet the demands for flexibility and privacy in large transactions while relying on blockchain technology and banking networks for rapid settlement, significantly shortening transaction cycles.
Moreover, deep liquidity support is also indispensable, as it integrates market resources and institutional networks to provide stable pricing and diversified trading options, assisting institutions in smoothly entering the digital asset market.
4. Payment Financial (PayFi) Solutions
As digital assets become more popular, enterprises and merchants are gradually increasing their demand for digital asset payments, especially in regions 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 seen as a feasible solution to address these challenges.
However, the complexity and potential risks of digital asset payments have caused many traditional enterprises to hesitate— for businesses wishing to support digital asset payments, the biggest issues lie in the complexity of the payment process and compliance. Additionally, the exchange between fiat and digital assets involves issues such as exchange rate fluctuations, tax issues, and regulatory restrictions from different countries, all of which increase the difficulty and cost of payments.
In short, enterprises and merchants need a backend system that can seamlessly integrate fiat and digital asset payments, which can both reduce exchange costs and ensure compliance and security during the payment process; additionally, to meet the needs of cross-border operations, the payment solutions must also support multi-currency payments and settlements.
Compliance-focused digital asset platforms like OSL have a natural advantage when expanding these businesses, as they can provide a complete set of PayFi solutions through technical and compliance support to help enterprises tackle complex challenges in the payment field.
Firstly, these platforms support seamless instant exchange between fiat and digital assets, and can achieve multi-currency payment settlements globally, simplifying cross-border payment processes; secondly, platforms like OSL that maintain good cooperative relationships with banks can at least ensure compliance and stability during the payment process, avoiding risks such as frozen accounts and providing a reliable operating environment for enterprises.
Through these key services, traditional institutions can efficiently and securely enter the digital asset market while lowering the barriers to entry. This service system not only addresses core pain points related to asset security, liquidity, trading efficiency, and investment optimization but also provides comprehensive support for institutional strategic layouts in the digital asset ecosystem.
Variables in the Digital Asset Industry Targeting Institutional Services
According to the latest statistics from Bank of America, the total market value of the global stock and bond markets is approximately $250 trillion, while the overall scale of other asset classes, including real estate, art, and gold, is difficult to estimate—global gold market size is estimated at $13 trillion, and the global commercial real estate market valuation is close to $280 trillion.
In comparison, CoinGecko data shows that the total market value of the global digital asset market is approximately $3.3 trillion, which accounts for only about 1.3% of the global stock and bond market. The total scale of emerging tracks like asset tokenization (RWA) is merely $13 billion, which is almost negligible in the entire financial market.
Source: Wall Street News
Thus, 2024 is destined to hold milestone historical significance for the Web3 and digital asset world—enterprise and institutional layouts of crypto assets are gradually moving from the exploratory phase to the deep integration phase, with the market space for To B services significantly expanding, becoming the next growth engine driving industry development. This not only indicates that more enterprises and institutions are beginning to take digital asset allocations seriously but also foreshadows further integration of digital assets with the traditional financial system.
Especially for traditional institutions and financial giants, they possess a vast user base and an enormous capital scale. If these resources can be successfully bridged, it will inject unprecedented 'incremental capital' and 'incremental users' into Web3, promoting the rapid rise of 'New Money' in the digital asset ecosystem and accelerating the mainstream application of blockchain technology.
In this context, whoever can connect the traditional funds and massive user base of Web2 giants is likely to become the key infrastructure linking Web2 (traditional finance) and Web3 (digital asset finance), and achieve a complete breakthrough with the strong backing of traditional funds.
In this process, the role of To B service providers is crucial, especially those market participants with compliance, security, efficiency, and diversified service capabilities, who are more likely to gain substantial development dividends in this wave of institutionalization.
Taking OSL, the first licensed digital asset platform to obtain licenses from the Securities and Futures Commission and AMLO, go public, audited by one of the Big Four accounting firms in Hong Kong, and acquire SOC 2 Type 2 certification, as an example, institutions usually consider adopting a particular service if it meets the following core conditions:
● Compliance and Security: Service providers need to strictly adhere to regulatory requirements, have a complete KYC and AML system, and ensure the legality and transparency of fund flows, especially when funds cross into the digital asset market, where compliance is the primary condition.
● Diversified and Customized Service Capability: Institutional clients need not only trading services but also comprehensive capabilities covering asset tokenization, custody, OTC trading, etc., to achieve full-link support for asset allocation and management.
● Efficient Technical Integration Capability: Possessing a modular system architecture that can quickly deploy digital asset trading and management functions for traditional institutions, lowering technical access thresholds and enhancing service response efficiency.
● Industry Experience and Partnership Network: Possessing rich industry practical experience and extensive ecological partnerships to quickly respond to market demands and provide customized solutions for institutional clients, accelerating their digital asset layout.
This means that as the demand for To B services in the digital asset market heats up, the importance of licensed exchanges becomes increasingly prominent, and they can be said to be at the forefront of the new era, grasping the 'lifeline' of various businesses—whether enterprises are incorporating virtual asset ETFs into their investment portfolios or trading and custody of virtual assets like Bitcoin and Ethereum, licensed exchanges provide crucial support.
Summary
If 'Web3 in 2024 is like Web2 in 2002', then now might be the right time to act.
As enterprises and institutions deepen their layouts in digital assets, To B service providers are standing at the core stage of the digital asset market. Those who can meet diverse demands from compliance to trading, from tokenization to payment finance will become key players in defining the next generation of financial ecosystems.
Especially for licensed exchanges like OSL, their comprehensive and multi-tiered service capabilities are expected to further enhance their importance in the wave of digital asset institutionalization, particularly in acting as a 'bridge' and 'infrastructure' that efficiently introduces existing assets from the traditional financial market into the on-chain ecosystem, unlocking their potential value.
As winds start to rise, after 2024, when the dust settles, Web3 and the crypto industry may really enter a new cycle.
