How Wall Street Moved In While Crypto Was Down

A sector already battered by successive blowups, aggressive regulators and a rough macro backdrop is now attracting the attention of traditional finance players who sat out the last cycle. BlackRock, Citadel and Deutsche Bank are among the major names making moves this week.

During the 2021 bull run, crypto drew mainstream interest and turned onlooking skeptics from traditional finance into would-be opportunists. By the time meme coins were dominating headlines, though, those firms had already missed their entry point. Now, with the theory being that predators move when prey is weakest, institutional money appears to be timing its entrance accordingly.

This wave of TradFi interest follows a sustained run of damage to the industry: the collapse of FTX, the unraveling of crypto-friendly banking partners, and Gary Gensler's enforcement-first approach toward major exchanges and tokens. After years spent dismissing and mocking an industry that threatened its position, traditional finance is now moving in. The open question is whether crypto stays a genuine alternative system, or gets absorbed as infrastructure for the very institutions it was built to bypass.

An Opening for the Incumbents

With several of crypto's biggest names sidelined or on the defensive, the timing looks favorable for established finance. Do Kwon, Celsius, Three Arrows Capital and Sam Bankman-Fried have all damaged the industry's credibility, while SEC actions against Coinbase and Binance have both companies playing defense. That combination has created an opening for traditional players who previously stayed away.

An early signal came at the House Financial Services Committee's hearing on the future of digital assets, where Prometheum's CEO appeared to echo talking points favorable to stablecoin and banking regulation — an odd focus given the company is ostensibly a securities exchange, a contradiction several observers flagged. One reading is that Prometheum is less interested in listing existing crypto assets than in laying groundwork for a future wave of TradFi-issued tokens, potentially including its own. Given Prometheum's background, critics questioned why the SEC would showcase it as a model example.

Since that hearing, BlackRock filed for a spot Bitcoin ETF naming Coinbase as custodian, followed by similar filings from WisdomTree and then Valkyrie. Citadel, which had been preparing its entrance for a while, saw its backed exchange go live this week — with hope it won't follow the same playbook that sank FTX and Alameda. Deutsche Bank, meanwhile, applied for a digital asset license and has been discussing the branding potential of NFTs. More broadly, over half of Fortune 100 companies have explored crypto in some capacity since 2020, according to data cited by Coinbase and The Block.

Despite the interest, much of TradFi still treats the space dismissively:

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

That skepticism, however, hasn't stopped the capital from flowing in — and the criticism arguably isn't unfounded. Case in point: Su Zhu and Kyle Davies of the collapsed Three Arrows Capital recently unveiled OPNX, a new exchange built to capitalize on their familiarity with bankruptcy claims trading, announcing it would partner with an "ecosystem partner" called 3AC Ventures. The announcement came even as the exchange was caught clumsily faking trading volume through wash trades, and as it rolled out "justice tokens" tied to a defamation lawsuit against Mike Dudas, effectively turning litigation into a memecoin.

Regulators Are Circling Too

While traditional finance moves in, U.S. regulatory agencies are fighting over jurisdiction, reshaping the industry into something more accommodating to Wall Street in the process. Oversight had largely sat with the CFTC and SEC, but the Federal Reserve is now entering the picture: Chair Powell acknowledged that stablecoins constitute "a form of money," a framing that then lets the Fed assert regulatory authority over them. The idea of private companies issuing what amounts to national currency would have seemed implausible a generation ago, and it clearly unsettles the existing financial establishment — even as the Fed's willingness to legitimize the concept is itself notable. As this outlet noted following March's USDC depeg, the prospect of a CBDC eventually becoming a tool for pervasive surveillance and control remains a genuinely alarming scenario.

TradFi's interest extends into DeFi as well: Uniswap's upcoming v4 is being viewed as a potential mechanism for building permissioned liquidity pools restricted to KYC-verified addresses. Between institutional capital and regulatory pressure, there may soon be little room left to operate outside the system. As both forces reshape the industry into a more diluted version of its original vision, the lingering question is whether DeFi ends up pushed underground as a result.