Digital Assets Enter the Institutional Era

Bitcoin, along with almost all digital assets, has emerged very much from the ‘bottom up’ in terms of adoption. What began as a project of cryptographically curious, technologically savvy developers with a lack of faith in the international monetary system quickly gained approval with millions of individual investors and users across the globe. Institutional adoption, however, has progressed at a glacial pace in comparison, marred by intense skepticism from financial institutions, global regulators, and institutional investors. Digital asset adherents often found themselves unable to access banking services; digital asset exchanges frequently had to domicile in offshore jurisdictions; and bitcoin was a proverbial ‘dirty word’ for a lot of institutional money.

With the arrival of the Trump administration, that has changed dramatically. Driven by favorable regulatory winds, institutional adoption has not only arrived — it is surging. 

Regulatory Reversal in the USA

Since the November 2024 election, Bitcoin and other digital assets have experienced a bull run, with Bitcoin up around 60% and Ethereum up around 78% (a few other coins such as Ripple, Cardano, and Chainlink have seen triple-digit price increases).¹

Not only has President Donald Trump shown a personal interest in furthering digital assets via the launch of his memecoins and a Trump family business dedicated to Bitcoin, but his administration has shown a more permissive approach to digital asset regulation, in particular (but not only) with the attitude of the Securities and Exchange Commission (SEC).

Notably, the ‘regulation by enforcement’ approach adopted under the Biden administration ended, as the SEC began to engage more meaningfully with the digital assets industry. Alongside the appointment of Paul Atkins as SEC Chair (and the corresponding resignation of Commissioner Gensler), the SEC has taken a number of decidedly crypto-friendly actions: they have excluded certain digital assets and services such as memecoins, stablecoins and staking from the US securities laws, dismissed several enforcement actions, lawsuits, and appeals against high profile actors such as Binance, Coinbase, Kraken and Ripple, rescinded a variety of regulatory orders impacting DeFi exchanges, digital asset custodians, and digital asset accounting treatment for banks, established a crypto-task force to meaningfully engage with industry and address a wide array of digital asset issues, and published a set of generic listing standards to permit quicker listing for crypto ETFs while allowing for a wider range of underlyings.

Furthermore, away from the SEC, Congress has made progress by passing the GENIUS Act to regulate stablecoins and proposing the CLARITY Act to further clarify regulatory responsibility for digital assets between the SEC and the CFTC. Finally, President Trump has issued executive orders calling for the establishment of a strategic digital asset reserve and the new rules governing the investment eligibility of digital assets in US 401(k) pension accounts.

Although the USA’s regulatory landscape remains a significant driver of institutional adoption, European and UK developments have also contributed. Europe passed the Markets in Crypto Assets Regulation (MiCA), the first comprehensive and transparent regulatory framework directly governing digital asset markets and industries. The UK recently repealed its unfortunate ban on retail access to crypto ETNs, a significant blocker, not only to investment uptake but also to the establishment of a robust digital asset ecosystem.

Further Phases of Institutional Adoption

The road to proper institutional adoption remains long and difficult, with a number of milestones along the way. A favorable, transparent, and reliable regulatory landscape is only one of the first. Subsequent milestones bifurcate into investment and utility — that is, acceptance of digital assets as a viable and important asset class and utilization of digital assets as a systemic element of financial infrastructure. We have begun to see the first, while the second remains more distant.

Access via Traditional Investments

While Europe has had a robust ecosystem for crypto-linked exchange-traded products, with the first ETPs launched in 2015, acceptance of digital assets as an institutional asset class really arrived with the launch of the ETPs in the USA. Mainstream institutional players such as Blackrock entered the scene with a bang, and global AUM of Bitcoin and Ethereum ETPs alone rose to approximately USD 200 billion.² Nevertheless, many estimates peg institutional ownership of ETPs to be no more than 25% of total AUM.

While a number of institutional investors are engaging with digital assets, far fewer are doing it natively; that is, very few are investing directly, outside of traditional financial infrastructure and even fewer are offering crypto-native products or services to their clients.

Adoption of Digital Asset Infrastructure

Institutional adoption of digital asset infrastructure lags investment, but it remains a space to watch. Custody and stablecoins will most likely be the first milestones achieved, as a number of traditional financial service firms leverage recent changes in regulation to incorporate these services into their offerings. Tokenization, whether of assets or securities, remains a promising field, but it is hindered by the sheer logistical challenge of changing an entire issuance, trading, custody, and settlement infrastructure, one that has developed over more than 50 years.

While one can debate the distinctions about the extent to which institutional investors are adopting digital assets, it is impossible to ignore that significant advances have been made. A strong and favorable regulatory framework has sown fertile ground for investment demand, which in turn will help lay the foundations for the development of crypto-native infrastructure. Although that development may seem far away, it is easy to foresee that in less than a decade, future investors will look at our current system of issuing, trading, holding, and settling securities with whimsical nostalgia.

References

¹ CoinShares Research

² CoinShares Research, AUM as of 3/9/2025.