TradFi Takeover

The vultures are circling.

An industry weakened by a series of crises, regulatory aggression and tough macro conditions is becoming a prime target for those who missed their chance last cycle.

Blackrock, Citadel and Deutsche Bank are among the big names making big moves this week.

2021’s bull market saw crypto gain mainstream attention, turning old money from sceptics into scavengers.

But by the time meme coins began to make headlines, their entry point was long gone.

Now, instinct tells them to strike when their prey is at its most vulnerable.

A TradFi takeover is the natural culmination of a non-stop assault since the FTX blow-up, an implosion in crypto-friendly banking, and now Gensler’s regulation-by-enforcement approach against top CEXs and tokens.

After years of dismissing, attacking and ridiculing a tool which threatened the status quo, traditional finance is now swooping in.

Will crypto remain an alternative system?

Or simply be co-opted as TradFi infrastructure?

With crypto’s larger players either out of the way or on the back foot, the window of opportunity is wide open.

Names like Kwon, Celsius, 3AC and SBF have tarnished the industry’s reputation, and SEC action against Coinbase and Binance have put them on the defensive.

Now is the perfect time for established players to get in on a sector that they previously turned their backs on.

The first hints came during the recent Financial Services Committee hearing on The Future of Digital Assets, and the appearance of Prometheum.

Coming across as a political plant presenting a compliance wet dream, the CEO parroted talking points on stablecoins and banking, despite the company’s focus being a contradictory securities exchange.

Perhaps Prometheum isn’t all that interested in listing existing assets, but rather prepping the ground for a slew of TradFi tokens (including their own) over the coming months and years?

But with Prometherum’s background, they sure seem an odd pick for the SEC's poster boy.

Since then, Blackrock filed with the SEC for a Bitcoin ETF (proposing Coinbase as custodian), with WisdomTree, and then Valkyrie following suit.

Citadel has been gearing up for some time, but the exchange it backed has finally launched (hopefully they’re not taking inspiration from FTX and Alameda).

Even Deutsche Bank is getting in on the action, applying for a digital asset license and discussing the branding potential of NFTs.

In fact, over half of Fortune 100 companies have explored crypto in some way since 2020, according to Coinbase and The Block.

The industry is still seen as being in its infancy, however, and TradFi’s dismissive attitude is still strong:

It’s clear these crypto native platforms would have benefitted from having an adult in the room.

But that won’t get in the way when there’s money to be made…

…and, to be honest, she might have a point.

Giga-rekt failed hedge funders Zhu and Davies recently announced that OPNX, their new CEX set up to leverage their intimate knowledge of bankruptcy claims, would be working alongside an “ecosystem partner” called… 3AC Ventures.

The tone-deaf grandstanding came whilst the exchange was simultaneously proving completely amateur at faking volume via wash trading, as well as launching justice tokens to memecoin-ify lawsuits.

While TradFi piles in, various US regulatory bodies battle over who gets to control crypto and mould the industry into something more Wall St-friendly.

Having mainly been the domain of the CFTC and SEC, now the Fed is throwing its hat into the ring.

By accepting that stablecoins are “a form of money”, Powell goes on to then claim jurisdiction over their regulation.

Private companies issuing national currency is a concept which few could have imagined a generation ago, and one that makes the established system very uncomfortable.

The Fed recognising the validity of such a key part of our infrastructure is both encouraging and troubling…

As we wrote after March’s USDC depeg:

The thought of a CBDC becoming the ultimate tool for nightmarish surveillance and control is a truly terrifying prospect.

TradFi is even looking at DeFi with interest, with Uniswap’s forthcoming v4 seen as a potential way to create permissioned pools for KYC’d addresses.

Soon, there may be nowhere to hide.

As both TradFi and regulators make their mark on the industry, leading to an ever more watered-down version of crypto’s original goal…

…will DeFi be forced to go dark?

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