Under the 'Trump Trade', the incremental opportunity for 'Old Money' to enter the market has arrived. How will the wave of institutionalization reshape the digital asset market?
During the 2024 U.S. election cycle, especially with the emergence of 'the first crypto president' Trump, it is undoubtedly the best promotional figure for digital assets. As Trump's second term settles, Bitcoin has also continuously broken through $70,000, $80,000, and $90,000 in the past half month, just a step away from the $100,000 threshold.
Against this backdrop, global market recognition of digital assets has significantly increased. Imagine if traditional funds with large volumes start turning to Web3; which channels are most likely for these representatives of mainstream institutions and high-net-worth individuals, 'Old Money', to layout digital assets?
The wave of institutionalization in digital assets spawned by the 'Trump Trade'
During the 2024 presidential election, Trump promised a series of policy measures supporting Web3 and digital assets, including incorporating Bitcoin into the national reserves and relaxing industry regulations. Although these may include political bargaining elements, they undoubtedly provide an important reference framework for the direction of the digital asset industry over the next four years.
Over the next four years, we can almost foresee a loosening of administrative, legislative, and regulatory aspects under the 'Trump Trade', especially regarding market compliance and legality. Thus, the next four years will become a key 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 of Representatives by a vote of 279 to 136, aiming to establish a new regulatory framework for digital assets. Once it is also approved by the Senate, it will provide the industry with a set of executable and clear regulatory rules, greatly reducing regulatory uncertainty, promoting the lawful process of the market, attracting more institutional capital into the digital asset field, and driving the wave of digital asset institutionalization.
Image Source: FIT21 Act
Against this backdrop, mainstream financial institutions and high-net-worth individuals are already gearing up. Pennsylvania legislators Mike Cabell and Aaron Kaufer have introduced a Bitcoin Strategic Reserve Bill to the Pennsylvania House of Representatives, proposing to allow the Pennsylvania Treasurer to invest in Bitcoin, digital assets, and crypto ETFs.
According to SoSoValue data, the daily trading volume of Bitcoin spot ETFs in the U.S. surpassed $5 billion multiple times after November 6, with November 13 breaking through $8 billion, reaching a new high in eight months. Additionally, three Bitcoin spot ETFs in Hong Kong had a total trading volume exceeding 420 million Hong Kong dollars in the same week, reflecting a growth of over 250%, with the Bitcoin ETF launched in collaboration by OSL and Huaxia Fund (Hong Kong) and Harvest International accounting for approximately 86% at 364 million Hong Kong dollars.
Image Source: SoSoValue
However, unlike traditional trading businesses aimed at ordinary users with small amounts, global institutional investors and high-net-worth groups have a stronger demand for compliance, security, and efficient services. For them, digital asset allocation is not just a strategic shift in investment allocation but also faces a tactical threshold of compliance and security.
In this context, new ideas on the B-end are quietly brewing, with some interesting new strategies emerging. On November 18, the licensed digital asset company OSL in Hong Kong announced a collaboration with Fosun Wealth Holdings and Huaxia United to offer a virtual asset ETF subscription service, allowing investors to directly subscribe to ETF products using their held virtual currencies without needing to sell or liquidate them first.
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 convert the 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 compliant, secure, and transparent digital asset management, trading, and payment solutions will become the core focus of market competition. This also means that opportunities for To B service providers are undoubtedly enormous—the demand from financial institutions and high-net-worth clients for digital asset allocation will greatly drive the development of related services, especially in areas like digital asset custody, OTC trading, asset tokenization, and payment finance.
The To B service market is on the verge of explosion, with all parties rushing to layout to seize market opportunities. How will the new demands for digital assets reshape the landscape of the entire industry?
What key demands does the wave of institutionalization in digital assets face?
We can break down the core pain points and needs of 'Old Money' entering the digital asset market, which can primarily be divided into four segments for traditional financial institutions and high-net-worth individuals:
Comprehensive compliance solutions for financial institutions (Omnibus), physical asset tokenization (RWA) / asset on-chain, custody / OTC services, PayFi solutions.
1. Comprehensive compliance solutions for financial institutions (Omnibus)
First, traditional financial institutions have begun to enter digital asset trading this year, whether they are virtual asset ETF service providers or traditional retail brokers. An increasing number of investors, financial institutions, publicly listed companies, family offices, etc., are also actively considering configuring digital assets through compliant channels.
However, for these institutions, entering the digital asset field is not easy, with the biggest pain point being deployment time and cost—compared to traditional financial products, the decentralized nature and technical complexity of digital assets mean that institutions require more time to complete system integration, risk management, and compliance framework construction.
Especially since building a compliance system that meets regulatory requirements (especially KYC and AML frameworks) requires significant investment in technical resources and financial costs, and must also deal with the rapidly evolving market dynamics and constantly changing compliance requirements of crypto assets. This high consumption of time and costs often becomes a major barrier 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 clients with compliant and secure digital asset trading services to meet diverse investment needs, it is likely to open the door for these institutions to enter the digital asset market.
Taking OSL, the currently compliant exchange in Hong Kong, as an example, its comprehensive compliance solutions (Omnibus) include strict reviews of assets and transactions, a complete KYC and AML system, and an asset security mechanism with hierarchical management of private keys, which can greatly lower the threshold for institutions to enter the digital asset space.
At the same time, this division of labor model of 'professionalism + security' not only fully leverages 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, creating complementary advantages that promote the deep integration of traditional finance and the digital asset ecosystem, providing solid support for the institutionalization of digital assets.
2. Tokenization of Real World Assets (RWA) / Asset On-Chain
Although traditional assets like stocks, bonds, and gold have high liquidity in financial markets, their trading is still limited by long settlement cycles, complex cross-border operations, and insufficient transparency. In contrast, non-standardized assets like artworks and real estate have long faced challenges in liquidity and trading efficiency.
Moreover, asset tokenization can not only enhance liquidity but also significantly improve transaction transparency and efficiency. BlackRock's CEO Larry Fink stated, 'The tokenization of financial assets will be the next step in future development.' It can effectively prevent illegal activities and, more importantly, achieve 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 currently exceeds $13 billion, while BlackRock's predictions are more optimistic, estimating that by 2030, the market value of tokenized assets will reach $10 trillion. This means that the potential growth space over the next seven years could exceed 75 times.
However, while businesses and financial institutions see the potential of asset tokenization, the technical threshold is high. Transforming traditional assets into on-chain tokenized assets requires comprehensive technical support and compliance guarantees, and there are 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, and will directly benefit from the hundreds of billions of dollars in un-tokenized liquidity in the traditional financial system, introducing it on-chain through compliant, secure, and transparent mature frameworks in the form of RWA (Real World Assets) and thoroughly unlocking its liquidity.
3. Custody / OTC Services
High-net-worth clients and institutional investors are most concerned about the security and liquidity of assets when considering digital asset investments—such as asset losses due to hacker attacks or operational errors, as well as issues regarding market liquidity during large transactions, which could lead to trading delays or significant price slippage, affecting asset allocation efficiency.
According to statistics from Finery Markets, in the first half of 2024, inter-institutional digital asset OTC trading volume surged, increasing by over 95% compared to the same period last year, with the second quarter seeing an acceleration in growth, as client trading volume increased by 110% year-on-year (80% in the first quarter).
Although the transaction volume of digital asset OTC still lingers around the tens of billions level compared to the trillions of dollars in centralized exchanges (CEX), the flexibility and confidentiality of OTC trading meet the needs of investment institutions for large-scale digital asset allocation. With regulatory improvements, it is expected to attract more investors to participate, further driving the growth of its market volume.
In this context, institutions need a service system with high security, high efficiency, and high liquidity to meet their needs in the digital asset field: on one hand, it must ensure the security of large-scale assets during storage and trading; on the other hand, an efficient OTC network needs to meet the demands for flexibility and privacy of large transactions while relying on blockchain technology and banking networks to achieve rapid settlement, significantly shortening trading cycles.
Moreover, support for deep liquidity is also essential. By integrating market resources and institutional networks, stable prices and diversified trading options can be provided, helping institutions smoothly enter the digital asset market.
4. Payment Finance (PayFi) Solutions
With the popularity of digital assets, the demand from businesses and merchants for digital asset payments has gradually increased, especially in regions with limited traditional banking infrastructure and in cross-border payment scenarios. Digital assets can offer convenience and efficiency through low-cost financial services, seen as a feasible solution to these challenges.
However, the complexity and potential risks of digital asset payments have made many traditional businesses hesitant. For companies wishing to support digital asset payments, the biggest problem lies in the complexity and compliance of the payment process, while the exchange between fiat currency and digital assets involves exchange rate fluctuations, tax issues, and regulatory restrictions in different countries, all of which increase the difficulty and cost of payments.
In short, businesses and merchants need a backend system that can seamlessly integrate fiat and digital asset payments, reducing exchange costs while ensuring compliance and security in the payment process. Additionally, to meet the needs of cross-border business, payment solutions must support multi-currency payments and settlements.
Platforms like OSL have a natural advantage in expanding these services, as they can provide a complete set of PayFi solutions through technological and compliance support, helping businesses tackle the complex challenges of payment.
First, these platforms support seamless instant exchanges between fiat currency and digital assets, enabling multi-currency payment settlements globally and simplifying cross-border payment processes. Secondly, partnerships with banks, like OSL, can at least ensure compliance and stability during payment processes, avoiding risks like frozen accounts and providing a reliable operational environment for businesses.
Through these key services, traditional institutions can efficiently and securely enter the digital asset market while lowering the participation threshold. This service system not only addresses the core pain points of asset security, liquidity, trading efficiency, and investment optimization but also provides comprehensive support for institutions' strategic layouts in the digital asset ecosystem.
The variable of 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 market is about $250 trillion, while the total scale of other asset classes, including real estate, artworks, and gold, is even harder to estimate—the global gold market is estimated to be $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 about $3.3 trillion, which is only about 1.3% of the global stock and bond market. Furthermore, the total size of emerging sectors like asset tokenization (RWA) is only $13 billion, which is negligible in the overall financial market.
Image Source: Wall Street News
Thus, for Web3 and the digital asset world, 2024 is destined to have milestone historical significance—cryptocurrency layout by businesses and institutions is gradually transitioning from the exploratory stage to deep integration, with the market space for To B services expanding significantly, becoming the next growth engine driving industry development. This not only means that more businesses and institutions are beginning to take digital asset allocation seriously, but it also indicates that digital assets will further integrate with the traditional financial system.
Especially for traditional institutions and financial giants, they possess a vast user base and enormous funds. If these resources can be smoothly bridged, it will inject unprecedented 'incremental funds' and 'incremental users' into Web3, rapidly promoting the 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 vast user bases of Web2 giants is likely to become a key infrastructure linking Web2 (traditional finance) and Web3 (digital asset finance), leveraging traditional funds to achieve a comprehensive breakthrough.
In this process, the role of To B service providers is crucial, especially for those market participants with compliance, security, efficient, and diversified service capabilities, who are more likely to gain significant development dividends in this wave of institutionalization.
Taking OSL, the first digital asset platform to obtain licenses from the Securities and Futures Commission and AMLO, listed and audited by one of the Big Four accounting firms in Hong Kong, and certified with SOC 2 Type 2, as an example, institutions typically consider adopting a service because 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; compliance is the primary condition.
● Diversified and customized service capabilities: institutional clients not only need trading services but also require comprehensive capabilities covering asset tokenization, custody, OTC trading, etc., to achieve full-chain support for asset allocation and management.
● Efficient technical integration capability: possessing a modular system architecture that can quickly deploy digital asset trading and management functionalities for traditional institutions, lowering the technical access threshold and improving service response efficiency.
● Industry experience and cooperation networks: possessing rich industry practical experience and extensive ecological partnerships to quickly respond to market needs, providing customized solutions for institutional clients, and accelerating their digital asset layout.
This also means that as demand for To B services in the digital asset market heats up, the importance of licensed exchanges is increasingly highlighted, standing at the forefront of the new era, grasping the 'lifeline' of various businesses—whether enterprises are incorporating virtual asset ETFs into investment portfolios or engaging in transactions and custody of Bitcoin, Ethereum, and other virtual assets, licensed exchanges provide critical support.
Summary
If 'Web3 in 2024 is like Web2 in 2002', then perhaps now is the right time to take action.
As the digital asset layout deepens for businesses and institutions, To B service providers are standing at the core stage of the digital asset market. Those who can meet the diverse demands from compliance to trading, from tokenization to payment finance will become the key players defining the next-generation financial ecosystem.
Especially for licensed exchanges like OSL, their comprehensive and multi-layered service capabilities are expected to further enhance their importance in the wave of digital asset institutionalization, particularly in acting as a 'bridge' and 'infrastructure' to efficiently bring existing assets from traditional financial markets into the on-chain ecosystem and unlock their potential value.
The winds begin to rise at the edges of the blue-green surface; after the dust settles in 2024, Web3 and the crypto industry may indeed enter a new cycle.
