In recent years, there has been a clear divergence in the global regulatory and market attitudes towards crypto assets, but the overall trend is moving towards a more defined institutional path. The United States has opened institutional channels for entry represented by exchange-traded products (ETPs) by adjusting securities market rules and regulatory practices; at the same time, commercial banks are establishing digital asset business units internally to actively meet customer needs and compliance requirements, gradually incorporating crypto assets from "marginal speculation" into the traditional financial framework.
Regional progress led by regulation is particularly typical in Europe. The European Union's Markets in Crypto-Assets Regulation (MiCA) has become a unified legal framework in the region, establishing relatively comprehensive rules around stablecoin issuance, market transparency, and custody responsibilities. The repeated coordination between regulatory agencies and regulatory technical standards shows the meticulous refinement before the legal provisions are implemented. Recently, European banks and regulatory agencies have provided feedback on technical details, reflecting the reality of stricter regulation while emphasizing operational feasibility.
In Asia, the regulatory paths show a clear divergence. Mainland China maintains high-pressure regulation on cryptocurrency trading and mining, but at the same time shows strategic intentions in discussions around the digital yuan and related stablecoins; meanwhile, places like Hong Kong and Singapore have introduced more inclusive regulatory sandboxes or licensing mechanisms to attract exchanges, custody, and compliant capital inflows, aiming to grasp the intersection of financial business and technological innovation. The different paces between regions make cross-border compliance and business operations a reality that must be faced in the institutionalization process.
One direct consequence of institutionalization is the commodification of products and services. Once the regulatory path is clear, "infrastructure" such as custody, auditing, and compliance due diligence becomes a prerequisite for institutional entry; products like ETFs/ETPs that can circulate within existing market structures become important bridges connecting retail and institutional investors, as well as spot and derivative markets. Although regulatory adjustments have reduced approval obstacles for individual products, they have also raised compliance thresholds, pushing market participants to institutionalize their risk management and governance.
However, institutionalization does not equate to complete deregulation. Regulatory focus is shifting from simply prohibiting or allowing to how to balance investor protection, financial stability, and innovation promotion. The strict requirements from regulatory agencies regarding anti-money laundering (AML) and know your customer (KYC) rules, the composition of stablecoin reserve assets, and custody responsibilities indicate that market participants cannot rely solely on product innovation to attract capital but must simultaneously establish a transparent and auditable governance chain. Recent discussions by regulatory agencies on technical standards and liquidity details also suggest that the implementation phase of regulation will still bring short-term friction and compliance costs.
From a market perspective, institutionalization is beneficial for improving long-term liquidity and pricing efficiency: more institutional funds, compliant custody, and clearing mechanisms can reduce counterparty risk and operational risk, but at the same time, it may also bind crypto assets more closely to the fluctuations of the macro financial system. Once regulation deeply connects with mainstream financial norms, the future risk transmission paths of crypto assets will become more complex, requiring regulators and market intermediaries to jointly improve cross-market monitoring and response mechanisms.
Conclusion and Observations: The key term at the current stage is neither "deregulation" nor "total prohibition," but "predictability of the system." As the regulatory framework becomes clearer, compliance infrastructure gradually improves, and traditional financial institutions begin to provide related services, the increased institutionalization of the crypto market will bring more long-term institutional participation opportunities, but this also requires market participants to upgrade simultaneously in compliance, governance, and risk management. Whether robust institutionalization can be achieved in the future depends on the operability of regulatory policies, the effectiveness of cross-border coordination, and the ability of market intermediaries to implement compliance and transparency.
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Original text: “Crypto Regulation and Institutionalization Process: From Grey Area to Mainstream”
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