Analysis: Cryptocurrency Faces a Trust Challenge—Here’s a Potential Solution

For numerous people, the initial exposure to cryptocurrency may have come through news stories related to the FTX scandal, conflicts with the SEC, or its connection to the dark web. The reality is that the digital asset industry has gained a reputation for being volatile and disorderly, which has intensified the public’s negative perception of crypto.

However, circumstances are evolving. In recent years, cryptocurrency has transitioned from a niche investment to a mainstream asset, garnering significant interest from developers, asset managers, and investors. Under the previous administration and SEC chair Gary Gensler, there was a notable contrast between governmental skepticism and the increasing acceptance of digital assets, with 26% of American adults investing in crypto following Bitcoin’s rise to $100K. This perspective has already shifted considerably under the second Trump administration.

Source: NFTevening

It is essential for the cryptocurrency sector to maintain the positive momentum under Trump, demonstrating that it can be stable, secure, and ready for institutional investment, thereby encouraging those who are uncertain that the potential benefits outweigh the risks.

A Secure Alternative

Recently, Bitcoin’s significant rally has further enhanced institutional adoption, with pension funds such as the State of Wisconsin Investment Board and Michigan investing in regulated cryptocurrency exchange-traded funds (ETFs), indicating a cautious yet notable entry into the market. Similarly, European Exchange-Traded Products (ETPs) experienced net inflows of £108 million in November 2024, underscoring a rise in institutional confidence.

Despite this progress, skepticism remains, with 75% of Americans still doubtful about the reliability and safety of crypto investments, according to a Pew Research Center survey. This reluctance largely arises from crypto’s reputation, worsened by high-profile failures like the Terra Luna collapse. While traditional finance has encountered its share of scandals, many of crypto’s most infamous failures originated from centralized entities rather than DeFi protocols, which, if properly designed, could reduce such risks. Addressing this perception is crucial for broader institutional acceptance.

Investing in an on-chain asset management platform helps mitigate the risks associated with failed crypto projects by utilizing decentralized, transparent systems. Instead of relying on a single company or individual to oversee everything, the use of smart contracts and multi-signature wallets ensures that all actions are secure, transparent, and adhere to established guidelines. This way, unlike centralized finance organizations, there is no single point of failure, and investors can trust that transactions are conducted fairly and securely. This arrangement makes it more appealing for traditional institutions to explore crypto.

The Finance Industry is Lagging Behind

The finance sector has historically been more cautious with new technologies compared to industries like retail or advertising. While other sectors have swiftly adopted automation and digital platforms to enhance efficiency, security, and customer experience, finance has been hindered by stringent regulations and the necessity to maintain trust.

Additionally, many traditional financial institutions remain reliant on outdated technology, which restricts their ability to innovate. In 2022, an industry survey revealed that a staggering 95% of top global banking executives identified legacy systems as significant barriers to growth. Likewise, a Financial Times report indicated that 43% of U.S. banks still utilize COBOL, a programming language from 1959, highlighting the ongoing dependence on legacy systems within the industry.

Nevertheless, the landscape is changing. In 2024, the momentum for real-world asset (RWA) tokenization was evident, with major financial players, including HSBC, JP Morgan, and Goldman Sachs, launching digital asset custody services focused on tokenized securities. With the RWA tokenization market projected to reach $50 billion this year, it is anticipated to evolve into a trillion-dollar global industry by 2030. However, as finance progresses, we need the foundational infrastructure to support it.

2030 Tokenized real-world assets predictions. Source: Tren Finance Research report

DeFi Has the Solution

As major traditional finance organizations consider or actively engage in digital assets, they should all be contemplating decentralized finance. DeFi has the potential to offer greater security for investors and developers than conventional financial products. Utilizing an on-chain asset management platform provides users with control over their assets through private wallets, which helps reduce the risk of centralized entities—such as banks or exchanges—mismanaging or losing funds. This approach also enables fund managers to create customized, permissioned systems, offering a more tailored form of asset management.

Crypto Is Not the Bad Apple It’s Portrayed to Be

It is time to stop allowing past failures to define the entire sector. With changes in regulatory attitudes—such as the establishment of the SEC’s crypto taskforce and Trump’s increasingly pro-crypto position—there is a clear opportunity to turn the page. However, to seize this moment, we must continue advocating for reform and transparency to rebuild trust. Institutional investors, asset managers, and developers are clearly observing the crypto landscape, but their reluctance is rooted in its tumultuous history.

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