Reasons major financial institutions are bypassing open ledgers to develop proprietary blockchains.

DRW founder Don Wilson states that public blockchains are at odds with institutional trading and risk management, hindering their adoption.

DRW CEO Don Wilson (DRW)

Key points:

• Don Wilson, the founder and CEO of DRW, indicated that Wall Street institutions are unlikely to embrace completely transparent public blockchains due to the conflict with their risk management and trading strategies.
• He noted that disclosing every institutional transaction on the blockchain would breach fiduciary responsibilities by exposing the intentions of large investors, which could amplify price effects and facilitate front-running.
• While Wilson recognizes potential in tokenizing physical assets, he anticipates that institutions will prefer private or permissioned blockchain solutions that emphasize confidentiality, data control, and market structure safeguards over the openness of public networks such as Ethereum.

Wall Street companies might adopt blockchain technology, but not in its present form. The transparent, distributed ledger available to all contradicts traditional finance methodologies, according to Don Wilson, founder and CEO of DRW, a trading firm in traditional finance that has been engaged in crypto for more than a decade.

"There is no scenario where institutions would agree to publish all of my trades on the blockchain,” Wilson remarked at the Digital Asset Summit in New York on Thursday. “Any money manager would consider it a breach of fiduciary duty to disclose every transaction they are executing to the public.”

The visibility of every transaction conflicts with how institutions handle risk and safeguard trading strategies, Wilson explained. If a substantial investor begins to sell their shares in a company, other market participants could discern the trend, leading to a significant price impact on the investor’s subsequent trades. In essence, such transparency can be detrimental to the trader.

“The issue lies not with the technology itself, but with its implementation,” Wilson stated. “I believe it is a mistake to place items on these chains that ensure complete transparency.”

Founded in 1992, DRW launched Cumberland in 2014, marking one of the earliest institutional crypto trading desks, coinciding with the emergence of bitcoin BTC$68,988.27 markets. This early involvement allowed the firm to observe the evolution of digital assets from niche markets to infrastructure that banks now analyze.

Wilson’s current emphasis reflects this transformation. He highlighted initiatives aimed at bringing traditional assets onto the blockchain while cautioning against utilizing fully transparent networks.

Ethereum has frequently been proposed as the blockchain most likely to be integrated into Wall Street, with developers promoting its extensive decentralized finance (DeFi) ecosystem and early tokenization involvement.

However, like Bitcoin, all transactions are exposed, and major banks have opted for a different route. Many have invested years into developing or supporting private, permissioned networks, asserting that financial institutions require stricter control over data, access, and compliance. Institutions such as JPMorgan, the largest U.S. bank by assets, have created proprietary systems, while others have backed platforms that restrict visibility and validation of transactions.

Wilson advocated for systems that restrict transparency. “Privacy is paramount,” he stated, outlining the necessary features for institutional acceptance. He also mentioned market structure concerns like front-running. “The capability for individuals to reorder transactions … is simply not acceptable for financial markets.”

His remarks come as tokenization continues to gain momentum across the sector. Banks and asset managers are exploring methods for transferring stocks, bonds, and various assets onto blockchain-based frameworks. Wilson acknowledges the significant potential, particularly for major asset classes. However, he anticipates that the resulting designs will differ from existing public chains.

“It is clear to me that this will not occur,” he said, regarding the notion that institutions will adopt fully transparent systems. “Everyone thinks I’m misguided … so I’m uncertain. Perhaps I’m mistaken. We shall see.”