A new report from crypto analytics firm Tiger Research warns that traditional financial institutions are poised to muscle out dedicated cryptocurrency exchanges, particularly in Asia. The study, covering nine countries, highlights a critical juncture for crypto trading platforms as governments prepare to approve Bitcoin exchange-traded funds (ETFs).
The core challenge is that traditional finance (TradFi) firms are entering the market by leveraging familiar investment products like Bitcoin spot ETFs. This allows new users to buy Bitcoin and high-capitalization altcoins directly through their existing banking and securities trading apps. "What traditional finance provides is not new information, but a familiar experience," Tiger Research stated. The report argues that ahead of the next bull market, crypto exchanges will only survive if they can prove to investors they offer services that traditional finance cannot.
The situation is described as acute across Asia. In South Korea, home to just five licensed crypto exchanges, the influence of TradFi is already being felt. Securities giant Mirae Asset is on the verge of sealing a takeover deal with Korbit, the country's oldest Bitcoin trading platform. Despite an estimated 16 million South Koreans having traded crypto, average daily trading volumes are down and Korean won deposits are decreasing, with investors moving to the stock market or overseas exchanges for better returns.
The picture is similarly challenging in Japan, where new crypto inflows have stagnated due to high tax rates not slated for reform until 2028. In Hong Kong, strict regulations limit unfettered access to crypto exchanges to high-net-worth professional investors.
Crypto exchanges' potential counter-strategy involves offering services banks cannot, such as access to decentralized finance (DeFi) and a wider range of cryptocurrencies. However, the report concludes these services are "meaningless" unless exchanges take steps to demystify DeFi and altcoins for casual investors.
The trend extends beyond Asia. David Sacks, the U.S. government's AI and crypto czar, told CNBC in January that "Banks are going to get fully into the crypto industry... It's going to be one digital assets industry." A more forceful shift is expected in Russia, where pending legislation may force internet providers to block overseas exchanges and push traders onto bank-run platforms.
