Established CEXs will have to compete with TradFi banks and brokers
As the new year begins, it’s hard to remember another time when the crypto market and general mood surrounding the sector was so vibrant. Unlike previous cycles, this time it seems less precarious and more durable. Regulatory certainty and an influx of institutional investment and interest mean the future of crypto is now inextricably linked to TradFi. But what does this mean for the OG players, the CEXs who have weathered the regulatory storm for so long?
2025 represents the first time that the established market of crypto-native operators, including industry titans such as Coinbase, Binance, Kraken and others, will have to compete with banks and TradFi brokers.
In the EU, the MiCA Regulation has made it easy for ESMA-approved banks and brokers to expand into cryptoassets, while ensuring that crypto-native firms and new entrants must undergo a due diligence process. full license.
Many companies in the United States are now looking to the Trump administration to issue executive orders in favor of the crypto sector in its first days in office. Such a move would bring long-awaited regulatory clarity to the US crypto sector, where companies such as Coinbase and Binance have long battled with the SEC under Biden’s tenure.
Trump now appears ready to offer some slight relief – but it comes at a potential cost. Once the new administration clears the way for crypto-native companies, everything will be clear to everyone, including traditional banks, brokers and fintechs. Robinhood, a company that straddles the line between 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 cryptocurrencies through 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
Although a suddenly crowded market presents unprecedented challenges for the established crypto sector, several factors still work in its favor.
First, most banks and brokers looking to launch a retail crypto offering aren’t necessarily looking to start liquidity from scratch. A much faster route to market is to leverage established liquidity pools under the hood through partnerships with crypto brokers and liquidity aggregators. For example, in May last year, Bitpanda expanded its partnership with Austrian bank Raiffeisen to 55 banks across the country in anticipation of the new MiCA rules.
Through such arrangements, centralized exchanges capable of maintaining liquidity will remain essential hubs for a growing industry, facilitating large-scale trading and playing a key role in determining prices.
Another USP for crypto exchanges in an increasingly busy market is industrial and technological expertise. Crypto has many unique characteristics, including the underlying blockchain technology as well as innovations such as staking and DeFi. In March 2024, crypto custodian Taurus partnered with staking platform Lido to enable Swiss banks to offer liquid staking to their clients.
Boasting a well-established reputation, industry-wide networks and connectivity, CEXs can also act as a trusted partner for institutional and retail users navigating these uncharted waters.
Although the advent of regulation invariably opens the door to competition, its benefits go both ways. Particularly for U.S. crypto companies that have spent years fighting the SEC or trying 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 under the same standards of compliance and transparency as any other financial institution, with comparable freedom to operate.
While the crypto industry deserves a moment of celebration, the reality is that the landscape is likely to change quite quickly following the inauguration on January 20, with an influx of new operators and partnerships. Established crypto companies will need to establish their USP in this newly competitive market, with the opportunity to serve as a bridge between the worlds of traditional and emerging finance.
