By the report from the Financial Times, traditional financial firms are building or funding new crypto exchange and custody platforms, hoping to capitalize on their expertise, reputations, and lack of regulatory scrutiny. They believe asset managers prefer dealing with established players over crypto-native exchanges, and are betting that fund managers are still interested in trading crypto.

This is due to the collapse of many cryptocurrency firms, and the disclosures of malpractices last year, which eroded the trust of crypto investors. To this end, firms such as BNY Mellon and Fidelity have already set up separate crypto custody divisions, and the Nasdaq is awaiting regulators to green-light its service. The traditional firms are also aiming to build more transparent platforms for crypto trading.

The new wave of legacy-backed crypto platforms will compete with Coinbase and Binance, which also host institutional clients. Traditional finance firms plans to compete by building more transparent operations, particularly in separating exchanges from asset custody to avoid conflict of interest and reduce risk.