forbes.com
As the new year kicks off, it’s hard to recall another time when the crypto market and general mood surrounding the sector has felt so buoyant. Unlike previous cycles, it feels less tenuous and more sustainable this time around. The certainty of regulation and the influx of institutional investment and interest means that crypto’s future is now becoming inextricably tied in with TradFi. But what does this mean for the OG players, the CEXs that have weathered the regulatory storm for so long?
2025 represents the first time that the established market of crypto-native operators, comprising industry titans such as Coinbase, Binance, Kraken, and others, will have to compete with TradFi banks and brokers.
In the EU, the MiCA regulation has created a smooth path for ESMA-licensed banks and brokers to expand into crypto-assets while ensuring that crypto-native firms and newcomers must undergo a full licensing procedure.
In the US, many firms are now looking to the Trump administration to initiate executive orders in favor of the crypto sector from his earliest days in office. Such a move would bring long-awaited regulatory clarity to the US crypto sector, where firms including Coinbase and Binance have long battled with the SEC under Biden’s tenure.
Trump now seems set to offer some sweet relief – but it comes at a potential cost. Once the new administration clears the rocks from the runway for crypto-native firms, it’s clear for everyone, including traditional banks, brokers, and fintechs. Robinhood, a firm that straddles the boundary of fintech and crypto, added 420,000 customers during crypto’s post-election surge last November.
So, some key questions. Will customers continue to use exchanges when they can just as easily trade crypto via their bank or brokerage account? How will established CEXs maintain their market position and continue to acquire new customers in this newly favorable regulatory environment?
Navigating a new landscape
While a suddenly crowded marketplace does introduce unprecedented challenges for the established crypto sector, there are several factors that still work in its favor.
Firstly, most banks and brokers seeking to launch a retail crypto offering aren’t necessarily looking to bootstrap liquidity from scratch. A far quicker route to market is to tap into established pools of liquidity under the hood through partnerships with crypto brokers and liquidity aggregators. For instance, in May of last year, Bitpanda extended a partnership with Austrian bank Raiffeisen to 55 banks across the country in anticipation of the new MiCA rules.
Via arrangements such as these, centralized exchanges that can maintain liquidity will remain critical hubs for a growing industry, facilitating large-scale trades and playing a key role in price discovery.
Another USP for crypto exchanges in an increasingly busy market is industry and technological expertise. Crypto has plenty of unique characteristics, including the underlying blockchain technology along with innovations such as staking and DeFi. In March 2024, crypto custodian Taurus partnered with staking platform Lido to allow Swiss banks to offer liquid staking to their customers.
With the benefit of an established reputation, industry-wide networks, and connectivity, CEXs can also play a role as a trusted partner for both institutional and retail users who are navigating these unfamiliar waters.
While the advent of regulation invariably paves the way for competition, the benefits work both ways. Particularly for US crypto firms that have spent years either fighting the SEC or attempting to stay below its radar, there is now an opportunity to compete on a level playing field. Exchanges and other operators can demonstrate that they operate to the same standards of compliance and transparency as any other financial institution, with comparable freedom to operate.
While the crypto industry deserves a moment to celebrate, the reality is that the landscape is likely to shift pretty quickly following the inauguration on January 20, with an influx of new operators and partnerships. Established crypto firms will need to stake out their USP in this newly competitive market, with an opportunity to act as a bridge between the worlds of traditional and emerging finance.