Why Bank of America is the Go-To For Institutional Crypto Investors?

Key Points:

• Cryptocurrency market continues to grow despite market correction and bankruptcies in 2022.
• Institutional demand drives offering of institutional-grade products, with Nasdaq introducing its digital asset custody service.
• TradFi firms may fill the void created by crypto company collapses and remain the counterparty of choice according to Bank of America’s report.

Bank of America (BoA) released last Thursday, the crypto ecosystem is still evolving despite the market correction and bankruptcies witnessed last year.

In fact, Nasdaq (NDAQ) is planning to launch a digital asset custody service by the end of this quarter, which is yet another testament to the increasing institutional demand for crypto-related products. As traditional finance (TradFi) firms like Nasdaq enter the digital assets space, more and more institutional-grade products are being offered to meet the needs of institutional investors.

Bank of America is optimistic about the future of blockchain technology and its disruptive nature, which is driving institutional investors to stay engaged in the crypto market over the long term. However, the bank also acknowledges the recent collapses of some crypto companies, which may slow institutional trading as investors reevaluate counterparty risk and ensure that custody, exchange, and broker-dealers are separate entities or siloed.

Despite these challenges, Bank of America notes that the void created by the collapse of some crypto companies may be filled by trusted and experienced TradFi firms that offer institutional-grade products. Furthermore, the Enhanced Safeguarding Rules issued by the U.S. Securities and Exchange Commission (SEC) could limit the ability of registered investment advisers to provide custody for clients’ tokens on most crypto-native exchanges, which may further drive TradFi institutions into the space.

Bank of America believes that TradFi institutions remain the counterparty of choice, and it expects their presence in the crypto ecosystem to continue to grow in the coming years.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Annie

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