Crypto Trading and Investing To Get Easier with Merge of FinTech, TradFi, and DeFi | Investment as a Service Crypto Platforms

2 min read

“44% of Gen Z investors got their start in investing by purchasing crypto; only 32% started with stocks and 21% with mutual funds.”

  • In this opinion piece, the author discusses the upcoming opportunity of Investment as a Service.
  • The opportunity is to leverage the ease of FinTech, the regulation of TradFi, and the on-chain flexibility of DeFi to provide a consolidated service that allows traders and investors to manage their assets more effectively.
  • To help make this a reality, the solution proposes to utilize custody partnerships to avoid the commingling of securitized and non-securitized assets.
  • The advantage is to provide a portfolio view across assets for informed wealth development.
  • This service may bring together crypto exchanges and traditional investment firms to offer expanded services and offerings.


By Colton Dillion & Edited by Nick Baker.

Bear markets are for building. The firms that manage to survive this protracted drawdown will position themselves to take advantage of the next bull run, whenever it may come. Through this process of competitive preparation, features that were cutting-edge in the last cycle become table stakes for the next one.

It’s no longer enough for crypto exchanges to simply facilitate buying and selling cryptocurrency. Exchanges cannot remain mere asset marketplaces, especially considering the rise of decentralized finance, or DeFi. Instead, they will construct portals to an entire financial universe.

The opportunity is enormous as Gen Z comes of age with crypto familiarity and eagerness to put their funds to work. In May, the FINRA Foundation and the CFA Institute released a survey that found 44% of Gen Z investors got their start in investing by purchasing crypto; only 32% started with stocks and 21% with mutual funds.

Furthermore, 65% of Gen Z investors use financial apps, and pay heed to their guidance: “Of those who have received suggestions from an app, 67% said the suggestions influenced them to make a particular investment, trade or purchase.”

“Investment as a service” crypto platforms that take cues from the curated experiences offered by TradFi giants like Vanguard will be able to welcome the next generation to a home base for wealth development.

Sandy Kaul of Franklin Templeton recently summarized this vision:

Cash could become spread across a set of central bank digital currencies (CBDCs), cryptocurrencies and stablecoins. Investments could be comprised of tokenized securities, funds and assets. Liabilities could be represented as tokenized obligations, and assets, valuables and collectibles represented as non-fungible tokens (NFTs) with contractual documents such as the title or insurance policy embedded within the token itself.

Unfortunately, early forays into this arena have been stymied by Uncle Sam’s giant wagging finger. U.S. crypto exchanges can no longer offer debt-based yield services like the erstwhile Gemini Earn program or retail-friendly staking services like Kraken’s verboten one or Coinbase’s beleaguered equivalent.

There is, however, a compliant path forward. One that involves proactively playing nice with the Securities and Exchange Commission and relying on robust custody partnerships, including tools like separately managed accounts. Commingling customer funds in large digital asset baskets is a non-starter, as it securitizes the underlying assets. But intelligent and automated direct indexing products, employed by an internet adviser registration, have made inroads with regulators.

These direct indexing platforms are the next step to wide adoption of long-tail digital assets beyond bitcoin (BTC) and Ethereum’s ETH. I agree with the leadership of Methodic Capital Management: “Indexes allow for efficient asset allocation, risk management, product development and performance measurement. Without indexes, crypto cannot evolve into an institutional financial market.”

Advisers will play a pivotal role in simplifying Web3, managing client inventory and maximizing yield with the inevitable proliferation of on-chain protocols, products and decentralized apps. Again Methodic Capital Management is on the money when they note: “What is missing in the U.S. is regulatory support and index adoption that captures the more nuanced and differentiating aspects of crypto markets, such as proof-of-stake reward rates.”

We certainly hope U.S. regulators will help us out and make clear guidelines above and beyond a simple spot ETF, but the innovation is going to happen with or without them.

See source article HERE

Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be treated as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The Crypto market is high risk, with high-risk and unproven projects. Readers should do their own research and consult a professional financial advisor before making any investment decisions.