In November 2025, the global financial landscape experienced a subtle yet profound shift. The Singapore Exchange (SGX) announced the launch of perpetual futures for Bitcoin and Ethereum on November 24. Almost simultaneously, Cboe Global Markets across the ocean announced that its "Continuous Futures"—a product functionally equivalent to perpetual contracts—would go live on December 15.
This was not an isolated product launch but a strategic collaboration spanning two continents. Traditional finance (TradFi) giants are no longer satisfied with the more "traditional" dated futures dominated by the Chicago Mercantile Exchange (CME) since 2017. Their target has been locked in—namely, the profit core of crypto-native exchanges (CEXs, such as Binance and Bybit): a massive market with an average daily trading volume exceeding $187 billion.
TradFi's entry strategy is extremely shrewd. They are not simply replicating but "restructuring" products to fit regulatory frameworks. Under the strict framework of the Monetary Authority of Singapore (MAS), SGX explicitly limits its products to institutions and accredited investors, successfully "compliant."
Cboe's "Continuous Futures" is a more sophisticated regulatory engineering. By setting an ultra-long expiration date of 10 years and supplementing it with daily cash adjustments, it functionally replicates perpetual contracts (without the need for rolling) while legally avoiding the term "perpetual," which has been "tainted" by offshore markets. This approach provides a stepping stone for the U.S. Commodity Futures Trading Commission (CFTC) to approve a functionally identical but nominally "clean" product. This is typical TradFi wisdom: not circumventing regulation but reshaping the discourse for regulation.
SGX President Michael Syn's remarks hit the nail on the head: "Incorporating perpetual contracts into a regulated framework cleared by an exchange… we provide institutions with the trust and scalability they have been waiting for."
At the core of this battle is TradFi's attempt to use "trust" and "regulatory certainty" as weapons to seize institutional liquidity from CEXs.
The Hunt by TradFi Giants: Using "Trust" as a Weapon
The Core Pain Point for Institutions: FTX's "Post-Traumatic Stress Disorder" (PTSD)
The collapse of FTX three years ago marked a turning point in the institutional crypto narrative. It exposed the fundamental flaws of the CEX model: asset opacity, conflicts of interest, and catastrophic counterparty risk.
For a pension fund or large asset management company, the biggest risk is not Bitcoin price volatility (Market Risk) but the misuse of client funds or the risk of exchanges running away with the money (Counterparty Risk). Institutional investors feel "deeply uneasy" about the "high counterparty risk" posed by "opaque, offshore, unregulated crypto exchanges."
The "original sin" of CEXs lies in their dual roles as market makers, brokers, custodians, and clearinghouses. This is a structurally conflicted setup that is strictly prohibited in traditional finance (such as under the Dodd-Frank Act). The risk control and compliance departments of institutions cannot answer a core question: "Who is my counterparty? Where is my collateral?" In a CEX, the answer is "the exchange itself." After the FTX incident, this answer is tantamount to "unacceptable."
TradFi's "Silver Bullet": Central Counterparty Clearing (CCP)
TradFi's solution is structural. When institutions trade on CME or SGX, they are not trading "with each other" but "with the clearinghouse." CME Clear, LCH Digital Asset Clear in London, and Cboe Clear U.S. act as central counterparties (CCPs).
These CCPs intervene in every transaction through "novation," becoming "the buyer for every seller and the seller for every buyer." This means that even if a counterparty defaults, the CCP will use its vast margin pool and default waterfall fund to ensure the performance of the trade. This "eliminates all counterparty, settlement, operational, default, and legal risks."
CME and LCH are not selling "Bitcoin futures"; they are selling "Bitcoin risk exposure cleared by a CCP." The "asset protection funds" provided by CEXs (such as Binance's SAFU Fund) are a form of "corporate guarantee," whose credibility depends on the willingness and financial strength of the CEX. In contrast, TradFi's CCP is a "legal structure," whose credibility is backed by regulation, law, and a vast, transparent financial firewall. The legal and compliance departments of institutions have no choice but to opt for the latter.
Different Paths of the Three Giants
CME (U.S.): The Victory of "Compliance Branding" and "ETF Lock-in" CME has become a "fortress" for institutional crypto derivatives by 2025. Its average daily trading volume (ADV) for crypto products reached $14.1 billion in the third quarter of 2025, with open interest (OI) hitting a record $31.3 billion. A more critical metric is the "large open interest holders" (LOIHs)—a synonym for institutions—reaching a record 1,014 in September 2025, far exceeding 2024's figures.
As early as 2023, CME surpassed Binance in Bitcoin futures OI. This marked the beginning of institutional ("smart money") liquidity flowing back from offshore CEXs to regulated TradFi.
CME's victory is not just about compliance. It has structurally "welded" its benchmark rate (CME CF Bitcoin Reference Rate, BRR) with the U.S. spot Bitcoin ETF approved in 2024.
Analysis indicates that most U.S. spot ETFs use CME's BRRNY (New York variant) to calculate their net asset value (NAV). Meanwhile, CME's futures contracts are settled based on BRR (London variant). This creates what is known as "price singularity."
Authorized participants (APs) of ETFs—such as large investment banks—need to hedge their Bitcoin exposure when managing ETF subscriptions and redemptions. They must use CME's futures because only CME's futures perfectly link to the ETF's NAV benchmark, thus eliminating "tracking error." CME has therefore locked in hedging liquidity from the trillion-dollar U.S. ETF market. Binance or Bybit's perpetual contracts, no matter how liquid, cannot provide this zero-basis-risk hedge for ETF APs.
SGX (Asia): Competing for "Onshore" Asian Trillions in Liquidity Asia is the "epicenter" of the growth of perpetual contracts. However, as SGX points out, this daily flow of up to $187 billion "is still primarily priced and settled on offshore platforms outside Asia."
SGX's strategy is very clear: leverage Singapore's AAA rating and MAS's clear regulations to provide a "trusted" trading venue for family offices, hedge funds, and institutions in Asia. Its goal is not to attract retail investors from Binance but to draw in institutional funds that wish to trade cryptocurrencies but are prohibited from using offshore CEXs.
Cboe & Eurex (Europe and U.S.): Innovators in Pursuit Cboe's "Continuous Futures" and Eurex, under the Deutsche Börse Group (via LSEG), with its FTSE index futures, indicate that TradFi's strategy is blossoming in multiple areas. Cboe's 23x5 trading hours, while not as extensive as CEX's 24/7, offer regulated, centrally cleared perpetual exposure, which is a significant advancement in itself. Eurex lowers the financial threshold for institutional participation through "nano" and "reduced-value" contracts.
Formation of the "Compliance Premium"
TradFi's liquidity currently pales in comparison to CEXs, but institutions are willing to pay a premium for safety. Research shows that CME's Bitcoin futures basis "continues to maintain a 4% annual premium over Deribit (a crypto-native exchange)."
This 4% premium represents the market price of the "compliance premium" and "counterparty risk aversion." It indicates that the market is quantifying regulatory risk. Institutions are willing to forgo 4% in annual returns in exchange for trading on CME, thereby avoiding custody risk and accessing through their existing prime brokers. The prices of TradFi and CEX will never fully converge. They serve two different risk appetites.
CEX's Defensive Battle: The Difficult Turn from "Offshore" to "Compliance"
CEX's dominance remains absolute. In 2024, the trading volume of perpetual contracts from just the top ten CEXs reached a staggering $58.5 trillion. Binance is the center of this universe, maintaining a market share between 35% and 43%, with monthly trading volumes often reaching trillions.
The breadth of products is CEX's "killer feature." TradFi currently only dares to touch BTC and ETH. In contrast, CEXs (such as Binance, Bybit, and OKX) offer a "supermarket" of perpetual contracts with hundreds of altcoins. If a hedge fund wants to go long on SOL and short on AVAX, CME is powerless, but Binance can accommodate that. CEXs can launch futures for a new hot token within weeks, while TradFi requires months of regulatory approval.
Achilles' Heel: The "Tightening Spell" of Global Regulation
CEXs are built on the quicksand of "regulatory arbitrage." Now, this quicksand is disappearing. Binance paid $4.3 billion in fines in 2023 and admitted to money laundering, leading to the resignation of its CEO. Bybit has been banned from operating in several countries, including the U.S. and the U.K. OKX faces scrutiny for providing services to U.S. customers from 2018 to 2024.
CEXs no longer face the question of "whether to be regulated," but rather "how to be regulated" for survival. A 2025 report criticized the governance of CEXs for having "accountability voids" and using "techwashing" to obscure risks. This model of rampant growth has come to an end.
CEX's Response Strategies: Differentiation, Imitation, Isolation
In the face of TradFi's invasion and tightening global regulations, CEXs are adopting multiple strategies to respond.
First is "seeking legalization." CEXs are desperately "collecting" licenses globally. OKX prides itself on its "extensive license portfolio" in Singapore, Dubai, and Europe. Kraken attracts institutions with its compliance reputation in Europe and the U.S. This is their only way to attract institutional funds.
Second is "imitating TradFi." CEXs are frantically replicating TradFi's infrastructure. The most typical examples are Coinbase Prime and Binance Institutional. They attempt to mimic the "Prime Brokerage" model, packaging trade execution, custody, financing, and reporting into a "one-stop" service to address institutional counterparty risk and operational challenges within their walled gardens.
Finally, there is "isolation and differentiation." The future of CEXs will inevitably be "dual-personality." They must split their business into two:
- "Compliance Persona" (e.g., Coinbase, Kraken, Binance.US): This entity will strictly adhere to KYC/AML, offer limited products, have low leverage, and specifically serve institutions and ETFs in the U.S. and Europe. It will increasingly resemble CME.
- "Offshore Persona" (e.g., Binance.com, Bybit): This entity will continue to operate in "friendly" regions like Dubai and Seychelles, offering hundreds of altcoins, high leverage, and financial innovations. It will serve global retail and crypto-native funds.
TradFi's invasion forces CEXs to undergo this painful but necessary split. CEXs that cannot complete the transformation will be pushed out of the market.
The Rise of DEX: Solving Trust with "Code"
The core narrative of DEXs: ultimate security through non-custodial solutions. Decentralized exchanges (DEXs) propose a more radical solution than TradFi. TradFi says, "Trust our clearinghouse (CCP)." DEXs say, "You don't need to trust anyone."
On DEXs, trades are executed on-chain through smart contracts, and user funds always remain in their own wallets. This fundamentally eliminates the custodial risks and counterparty risks associated with CEXs (like FTX). For crypto-native funds, this is the gold standard for risk avoidance. The DEX derivatives market is exploding, with trading volume expected to double from $15 trillion in 2024 to $34.8 trillion in 2025.
Competition Between Two Models: dYdX (Order Book) vs. GMX (GLP Pool)
dYdX (Order Book Model): "CEX on the Chain" dYdX v4 is an "outlier" among DEXs. It has abandoned Ethereum and built its own proprietary L1 blockchain based on Cosmos. Its sole purpose is to pursue speed. It achieves a CEX-level experience: a Central Limit Order Book (CLOB) that processes over 2,000 transactions per second with zero gas fees. dYdX is designed specifically for institutions and high-frequency traders, offering institutional-grade APIs and dominating DEX derivatives trading volume.
GMX (GLP Pool Model): "On-Chain Betting" GMX does not have an order book. It only has a "GLP" multi-asset liquidity pool. Traders engage in "P2Pool" (trading with the pool) rather than "P2P" (peer-to-peer). This provides a unique "zero-price impact" trading experience and utilizes Chainlink oracles to obtain prices from CEXs.
GMX and dYdX represent two extremes of DEXs and expose their respective "institutional flaws." GMX's model involves traders betting against LPs. As analysis suggests, GMX may face a "death spiral" in a bull market: if all traders go long and profit, the GLP pool will be depleted. Additionally, its reliance on oracles exposes it to the risk of "oracle attacks." For an institution seeking to hedge, this "betting" model is too risky.
dYdX's "CEX-like" model is the only DEX model that could be adopted by institutions, but it must also confront the next and most fatal obstacle.
The "Glass Ceiling" of DEX: The Fog of Liquidity and Regulation
DEX trading volume is only a fraction of that of CEXs. Critics sharply point out that a professional trader wanting to trade $100 million in futures "needs CME, Binance, or OKX—no DEX can handle this scale without incurring significant slippage." Liquidity is the first "hard flaw" of DEXs.
The regulatory black hole is the real "hard flaw" of DEXs. The "permissionless" and "anonymity" of DEXs are core values but also a nightmare for institutional compliance.
DEXs face a "compliance paradox": they must choose between "decentralization" and "institutional adoption," and they can hardly achieve both. How can a compliant fund (like Fidelity) use dYdX? It cannot execute KYC/AML on a DEX. How can it prove to the SEC (Securities and Exchange Commission) that its counterparties are not sanctioned entities?
Until DEXs can solve the issues of "on-chain identity" and compliance reporting, they will be excluded from the portfolios of large, regulated institutions (like pension funds and sovereign wealth funds). This forces these institutions to choose CME, SGX, and Cboe.
Endgame Projection: Liquidity Fragmentation and Market Reconstruction
The Solidification of a "Two-Track Market"
TradFi's invasion will not "kill" CEXs, nor will DEXs "kill" CEXs. Instead, the market is splitting into two (or even three) parallel ecosystems.
Track One: "Regulated Institutional Market"
- Players: CME, SGX, Cboe, LCH.
- Products: Cash-settled (USD-settled) BTC/ETH futures.
- Clients: ETF issuers, large asset management firms, banks, hedge funds.
- Characteristics: High compliance, CCP clearing, high "compliance premium," slow innovation. This is the market for "risk management."
Track Two: "Offshore Crypto-Native Market"
- Players: CEXs like Binance, Bybit, OKX; DEXs like dYdX.
- Products: Perpetual contracts settled in stablecoins/coin-based, covering hundreds of altcoins.
- Clients: Retail traders, crypto-native funds, high-frequency trading firms.
- Characteristics: High risk, high leverage, rapid product innovation, regulatory uncertainty. This is the market for "speculation and Alpha."
The direct consequence of this "dual-track system" is liquidity fragmentation. In TradFi, liquidity is highly concentrated (like the NYSE). But in the crypto market, liquidity is now fragmented across CEXs (Binance), DEXs (dYdX), TradFi (CME, SGX), and various L2s (Arbitrum, Base).
This presents an operational nightmare for institutions: "Each exchange requires separate risk management… legal teams must negotiate dozens of separate agreements… finance teams must manage collateral across multiple venues… this greatly consumes capital efficiency." Liquidity is abundant, but it is difficult to access efficiently.
Who is the Ultimate Winner? "Crypto Prime Brokerage"
Since liquidity fragmentation is inevitable, the "middleware" that aggregates these fragments becomes the market's "holy grail."
The dilemma for institutions is that they do not want to open accounts in ten places; they want to open one account that can access liquidity from all ten places. This is precisely the role of "Prime Brokerage" (PB) in TradFi.
A crypto PB (like Talos, Fireblocks) will provide a "unified margin account." Institutions will custody their assets with the PB, which connects to all liquidity venues like CME, SGX, Binance, and dYdX using its technology and legal framework. Institutions can hedge on the regulated CME through one PB interface while trading altcoins on Binance.
The invasion of SGX and CME objectively creates explosive demand for crypto PBs. The future winners may not be the exchanges at all, but those PB platforms that can "bind" this fragmented market for institutions.
Weaponization of Regulation: The Geopolitical Liquidity War
Regulation is no longer just "rules"; it has become a "tool" for countries to attract capital.
United States (CFTC/SEC): The U.S. strategy is "incorporation." By approving ETFs and CME/Cboe, it directs institutional flow to domestic, regulated venues. The new government's friendly stance toward crypto in 2025 accelerated this process.
Asia (MAS/HKMA): Singapore and Hong Kong's strategy is "nesting to attract phoenixes." They are building the world's clearest and most institution-friendly customized crypto regulatory framework. Their goal is to become the global institutional crypto hub outside the U.S. The launch of perpetual contracts by SGX is a financial weapon in Singapore's national strategy.
European Union (MiCA): MiCA provides a unified market, but at the cost of being "expensive" and "bureaucratic." It is strong on stablecoins but may lag behind Asia in derivatives innovation due to its rigid regulations.
We will see liquidity pools split along geopolitical lines. A fund in Zurich may prioritize Eurex; a family office in Singapore may find SGX to be its first choice; an ETF issuer in the U.S. will be locked into CME. The utopian dream of "global unified liquidity" in cryptocurrency has been shattered. Instead, we have a fragmented global market divided by regulatory landscapes.
This will be a reconstruction without an end!
The actions of the Singapore Exchange (SGX) and Cboe at the end of 2025 are not the end of TradFi's invasion, but rather the "D-Day" of this war to reshape the trillion-dollar derivatives landscape.
This war will not have a single winner; instead, it will lead to a permanent bifurcation of the market. TradFi giants (CME, SGX), armed with their unparalleled weapon of "trust" — Central Counterparty Clearing (CCP), will firmly lock down the most fertile territory of "compliant institutions," especially the hedging flow tied to ETFs.
The current dominant CEXs (Binance, Bybit) will not disappear. They will be forced into a "split personality": part of their business will "go onshore" seeking compliance, becoming bloated and slow; the other part will remain "offshore," relying on its unmatched product breadth and innovation speed to serve high-risk crypto-native funds and global retail investors.
DEXs (dYdX) represent the ultimate direction of technology, but their fatal flaw of a "compliance black hole" means they will remain an "experimental field" for institutions rather than the "main battlefield" for the foreseeable future.
Ultimately, this fragmented market will give rise to true winners: Crypto Prime Brokerages. Those platforms that can aggregate liquidity from TradFi, CEXs, and DEXs, providing institutions with a "one-stop" margin and risk management solution, will become the "super connectors" of the new landscape. The invasion of TradFi will ultimately push "exchanges" to the sidelines, while "middleware" will reign supreme.
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