In recent years, digital assets such as Bitcoin and Ethereum have gradually evolved from "marginal" assets to strategic targets in the eyes of financial institutions, and their integration with the traditional financial (TradFi) system has entered an accelerated phase. Below, we analyze the current status, driving factors, and risks and challenges of this integration from three dimensions.
First, institutional participation has significantly increased. Recent reports indicate that asset management companies like Franklin Templeton have explicitly included digital assets in their traditional asset allocation frameworks, signaling that "crypto has become a mainstream investment tool." Second, infrastructure is gradually being established. For example, the completion of the first interbank cash settlement Bitcoin/Ethereum OTC options transaction by DBS Group Holdings Ltd. (Singapore Bank) and Goldman Sachs in October 2025 reflects that the traditional banking system is building mechanisms for digital asset trading and settlement. Third, regulatory and legal frameworks are taking shape. The United States has passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), which for the first time allows regulated banks to hold stablecoins, thus providing a legal basis for the integration of banks and crypto assets.
These three driving factors converge, causing what was once viewed as high-risk, speculative crypto assets to gradually be incorporated into traditional financial asset allocation, product design, and settlement systems.
In terms of asset management, digital assets are transitioning from "alternative" to members that can be included in investment portfolios. Some studies indicate that the dynamic correlation between digital assets like Bitcoin and traditional stocks, bonds, and commodities is strengthening. This means that from the perspective of risk management and asset allocation, digital assets are no longer completely isolated but are increasingly influenced by macroeconomic factors, interest rates, and fluctuations in traditional financial markets.
In terms of payment and settlement, stablecoins and blockchain technology are bringing transformation to traditional bank payment systems. As mentioned, the GENIUS policy is prompting banks to consider incorporating stablecoins into their payment infrastructure, supporting 24/7 global settlement and faster cross-border transactions. Additionally, banks and financial institutions are beginning to participate in the market through blockchain networks, custody services, and digital asset derivatives, further merging the "crypto-traditional" boundary.
In terms of product innovation, banks, brokerages, and asset management companies are starting to launch products related to digital assets, derivatives, ETFs, etc. For example, institutions can access digital assets through derivatives, options, and funds, rather than being limited to direct holdings.
Overall, the market landscape is gradually shifting from "crypto on the outside" to "crypto embedded in the traditional financial system," with simultaneous efforts in payment, settlement, and asset management.
Despite the clear trend of integration, many challenges cannot be overlooked. First, regulatory and compliance risks still exist. The cross-border nature, anonymity, and technical complexity of digital assets make regulators cautious, and the regulatory framework has yet to be unified globally. Second, market interlinkages and risk transmission are increasing. Research shows that the volatility spillover effect between Bitcoin and traditional assets significantly increases under certain market conditions, meaning that digital assets may no longer possess the advantage of being "decoupled from traditional assets." Third, infrastructure and security issues remain a focus. Traditional financial institutions are beginning to explore custody, settlement, and clearing mechanisms, but these mechanisms are still less mature in the digital asset space compared to the traditional financial system, which may lead to operational, technical, and liquidity risks.
Furthermore, although traditional institutions like banks are entering this market, how to balance innovation with stable operations, ensure customer protection, and coordinate with traditional compliance frameworks are also important issues. If regulatory intervention is too strict, or if technical vulnerabilities arise, or if market participants have varying qualifications, it could trigger a crisis of trust, thereby undermining the integration process.
What can be foreseen in the future is that the deep integration of digital assets and traditional finance will continue to advance, but it is more likely to be a "gradual integration" rather than a "disruption." Regulatory policies, infrastructure development, and the enhancement of market participants' capabilities will be key determinants of the path forward. Specifically:
Stablecoins will play an increasingly important role in bank payments, cross-border settlements, and corporate financial management. Banks may leverage stablecoins to provide high-frequency, low-cost services.
Traditional institutions will launch more digital asset custody, derivatives, and asset management products, and digital assets may become part of the product mix for investment advisors and institutional clients.
Risk management and compliance logic will be further strengthened. Traditional financial institutions must introduce operational, compliance, and security mechanisms unique to digital assets while embracing them.
The market structure will become more diverse. Transitioning from "single holding" to "asset allocation + derivatives + structured products," the interaction between the digital asset market and traditional financial markets will become more frequent and complex.
In summary, digital assets are transitioning from "external innovation" to "elements of mainstream financial infrastructure." For investors, financial institutions, and regulators, understanding this transformation means not only focusing on price fluctuations but also paying attention to institutional frameworks, technological architectures, market participants' capabilities, and systemic risk management. The evolution of the depth of integration between traditional finance and the crypto world in the coming years is worth continuous attention.
Related: Michael Saylor's strategy to purchase $45 million in Bitcoin (BTC) kicks off November.
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