Katherine Ross


<p><em><em>This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire" target="_blank" rel="noreferrer noopener">subscribe</a>.</em></em></p>



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<p>Crossover’s officially expanding to the United States.&nbsp;</p>



<p>I spoke to CEO Brandon Mulvihill about the move, institutional interest, and the rise of over-the-counter (OTC) trading.&nbsp;</p>



<p>It’s probably already pretty obvious that this change is happening because of the shifting environment in the United States. Mulvihill told me it’s the perfect time for the team to enter the US markets — because it’s obviously a more favorable regulatory environment, but also because it looks like institutional interest is really picking up.&nbsp;</p>



<p>“Almost the day after the election, the US institutions were calling us immediately,” he told me. Mulvihill and his other cofounders started their careers in TradFi, so they’re pretty familiar with both crypto and the more, well, traditional side of finance.&nbsp;</p>



<p>And, with CrossX — its electronic communications network — Crossover does stand out as over-the-counter (OTC) trading picks up in crypto.&nbsp;</p>



<p>“One of the big drivers we see internationally is that people are getting out of — especially the crypto-native market makers and…quant hedge fund — they&#8217;re moving away from the on-exchange world into OTC trading, which should not be surprising, because if we look at the foreign exchange market, the same thing happened,” he said. Crossover is also the “largest OTC destination cleared by Hidden Road.”</p>



<p>He noted that even banks, which Mulvihill expects to be one of the “slowest financial institutions to the market” are already making headway, with the JPMorgan <a href="https://www.bloomberg.com/news/articles/2025-06-17/jpmorgan-to-pilot-deposit-token-jpmd-on-coinbase-linked-public-blockchain?srnd=phx-crypto">announcement</a> about JPMD and stablecoin progress by the <a href="https://www.wsj.com/finance/banking/crypto-stablecoin-big-banks-a841059e?gaa_at=eafs&amp;gaa_n=ASWzDAhSMoPcmOmAKC-LFtF9vIAkvrsxT32tv3mKrYUR72SV9gSZBrgax_8_krstsXk%3D&amp;gaa_ts=6851c701&amp;gaa_sig=IHNDW_Km5xkDw3GBlDQ_9AXzhaafufpXBIoNHObggT2BXLuH_1mGRRUUdjMMz65KqL944JKxPRcn80kwkinL9w%3D%3D">likes of Bank of America</a>.</p>



<p>“They are all aggressively, from what we see, building out or finally finalizing battle plans,” he said, reiterating that he still thinks there’ll be a “little bit of time before [banks] come in.”</p>



<p>Add to that the regulatory changes on the horizon. Mulvihill told me that the Crossover team has offered comments on the market structure bill, which is still working its way through DC. He told me he’s heard that it could come between August to the end of the year, though he was cautious to actually predict a timeline.&nbsp;</p>



<p>But the bill itself “changes the game,” he said, calling it “the most positive thing that, I think, has happened in crypto since the ETFs were launched.”</p>



<p>“As a result, what we&#8217;re going to see are mainstream, blue-chip financial institutions coming in waves. I think we&#8217;re going to see M&amp;A explode. I think we&#8217;re going to see investment explode. I think you&#8217;re going to see a real explosion of new customers into the space as a result of this bill.”</p>



<p>And this just reiterates the market potential for Crossover.</p>



<p>“We just fundamentally don&#8217;t believe that the institutional market can grow orders of magnitude in its current market structure form,” Mulvihill noted. Instead, it’ll evolve from here. Just like crypto has pushed TradFi to evolve, which is perhaps why Crossover is striking while the iron is heating up and moving into the US.&nbsp;</p>



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Empire Newsletter

Why Crossover is expanding into the US

<div id="highlights-block_627bd77135ba7" class="highlights">
        <ul>
                <li>There are several points of differentiation between retail and institutional investing, including risk, investment size, and strategies</li>
                <li>Cryptex&#8217;s TCAP is an Ethereum smart contract that relies upon trusted crypto data oracles for real-time price information</li>
            </ul>
    
</div>



<p>The cryptocurrency sector has been very much a retail phenomenon up until this point. Institutions are no doubt making moves, but full adoption is still underway. Once it is clear that the industry is at a tipping point, we will likely see the institutional floodgates fully opened.&nbsp;</p>



<p>In 2017, professional investors such as niche crypto funds cracked the institutional valve by following retail investors into the sector. The industry is still waiting on the entry of pension funds, mutual funds, hedge funds, investment banks, sovereign wealth funds and insurance companies. When you consider that institutions account for over <a href="https://www.reuters.com/business/retail-traders-account-10-us-stock-trading-volume-morgan-stanley-2021-06-30/" target="_blank" rel="noreferrer noopener">85% of the trading volume</a> of US stocks, these opened floodgates will take cryptocurrency market capitalization to the next level.</p>



<h3 class="wp-block-heading">How current institutional investment differs from its retail equivalent</h3>



<p>There are several points of differentiation between retail and institutional investing.</p>



<h4 class="wp-block-heading"><strong>Investment size&nbsp;</strong></h4>



<p>Investment size is the primary and obvious differentiator. Institutional investment managers allocate sums that have a real impact on crypto spot prices and liquidity. Comparatively, the institutions are in a different class entirely, with billions under management.</p>



<h4 class="wp-block-heading"><strong>Trading and investing strategies</strong></h4>



<p>Whereas the average retail investor employs simple trading strategies, the institutional equivalent uses advanced analytics-driven trading and investment strategies. They have access to a higher quality of financial data, utilize automated trading tools, and can tap into the best trading research to make better-informed trading and investing decisions.</p>



<h4 class="wp-block-heading"><strong>Risk&nbsp;</strong></h4>



<p>The institutions pay a lot more attention to risk and are far more cautious in their approach relative to retail. Most likely, this is because they&#8217;re managing someone else&#8217;s money rather than their own.</p>



<p>Both retail and institutional investors take on some level of risk, but on average, institutional risk appetites are much lower.</p>



<h4 class="wp-block-heading"><strong>Asset custody, governance and compliance</strong></h4>



<p>Institutions have rigid corporate rules to follow that retail investors don&#8217;t have to consider. They&#8217;re under far more scrutiny to adhere to governance and compliance rules, with oversight being applied by various state agencies.</p>



<p>When it comes to custody and ownership where digital assets are concerned, things are likely to be more straightforward for the individual investor, who owns the asset directly. Institutional investors may not hold the asset — ultimately, their clients are the owners of the assets.&nbsp;</p>



<h3 class="wp-block-heading">Factors holding institutional investment back</h3>



<p>All points of differentiation explain why there has been very little institutional investment in crypto up until now. Institutions have a specific set of fundamental requirements that must be satisfied before considering entering the nascent crypto market.</p>



<p>Institutions need to know there is sufficient liquidity in the markets they participate in to execute trades in short order. The scale of their typical investment allocations has simply been too big relative to the overall market capitalization of the crypto sector. Bitcoin reached a $1 trillion market cap in 2021. Yet that&#8217;s just a drop in the ocean when you consider that the global equities market cap stands at $125 trillion, with the bond market on a similar scale.</p>



<p>Relative to trading strategies and risk, there have been concerns regarding market manipulation and other questionable practices in crypto, such as <a href="https://www.sec.gov/comments/sr-nysearca-2019-01/srnysearca201901-5164833-183434.pdf" target="_blank" rel="noreferrer noopener">wash trading</a>, which would have implications for institutional involvement.</p>



<p>Institutions have been reluctant to get involved in crypto due to a <a href="https://www.reuters.com/article/us-usa-sec-crypto-currency-idUSKBN2AD0MF" target="_blank" rel="noreferrer noopener">lack of regulatory clarity</a>. To satisfy know your customer (KYC) and anti-money laundering (AML) regulations and remain compliant with rules built for TradFi, institutions need to know who is on the other side of the trade. The pseudonymous nature of most blockchains makes this problematic.</p>



<p>Despite these difficulties, the institutional investment landscape relative to digital assets is changing rapidly. All the factors holding back institutional involvement are getting resolved as the space grows and matures. Regulation is also catching up, and the ecosystem required to support institutional-grade investment is forming.</p>



<h3 class="wp-block-heading">The advent of indexing in crypto</h3>



<p>In the traditional markets, index funds are an easy way for individuals to invest passively with lower fees. While institutions actively manage funds, there is a case where exposure to an index-like vehicle in the crypto space would be beneficial to them at this stage.</p>



<p>Although institutions tend to have a more conservative appetite for risk, they are increasingly interested in gaining exposure to a high-yielding crypto market. With high risk within individual crypto projects, given their nascent stage of development, a product that tracks the entire crypto market will appeal to them.</p>



<p><a href="https://cryptex.finance/" target="_blank" rel="noreferrer noopener">Cryptex Finance</a> has launched a total crypto market cap (TCAP) token to capitalize on this market need. TCAP is an Ethereum smart contract that relies upon trusted crypto data oracles for real-time price information. TCAP is a crypto-derivative asset that tightly tracks pricing relative to thousands of cryptoassets. Through it, individual and institutional investors can gain price exposure to the entire crypto market in real time.</p>



<p>Although the US doesn&#8217;t have any form of a crypto exchange-traded fund to date, investment trusts such as Grayscale and index funds offered by Bitwise are available through the conventional markets. However, they are limited to the leading cryptocurrencies.</p>



<h3 class="wp-block-heading">Institutional-grade DeFi products</h3>



<p>Innovators within the crypto space have identified the issues that the institutions face and are building out solutions to overcome them — particularly where compliance is concerned. The following section reviews examples of such products already on the market.</p>



<p><a href="https://aave.com/" target="_blank" rel="noreferrer noopener">Aave</a> is one of the original DeFi money market protocols. <a href="https://cms.blockworks.co/aave-arc-to-provide-30-financial-institutions-access-to-private-pools-of-defi-liquidity/" target="_blank" rel="noreferrer noopener">Aave Arc</a> has been developed specifically with institutions in mind, as it&#8217;s a permissioned version of the Aave Liquidity Protocol. Due to compliance and regulatory concerns, regulated institutions cannot access the open-source Aave protocol. With Aave Arc, all participants are AML compliant and KYC verified. With the permissioned liquidity pools isolated from the regular Aave pools, institutions can now access DeFi without violating compliance rules.</p>



<p>For the Compound Liquidity Protocol, <a href="https://compoundtreasury.com/" target="_blank" rel="noreferrer noopener">Compound Treasury</a> has been launched. Separated from the original protocol, institutions can supply dollars to it via traditional banking, and Compound Treasury, in turn, gives those funds to the Compound Protocol. This degree of separation provides a trusted intermediary for institutions, allowing them to remain compliant with KYC and AML standards and other regulatory requirements.</p>



<p>Other market participants also pivoted to cater to the expected flood of institutional capital. Cryptex Tower is a product about to be launched by Cryptex Finance, which will add new hard mode vaults with a reduced collateral ratio to appeal to institutions alongside the regular mode vaults of their existing DeFi product. Gemini is supporting the offering with institutional-grade asset custody.</p>



<h3 class="wp-block-heading">Additional institution-centric services in DeFi</h3>



<p>Similar to KYC- and AML-compliant DeFi liquidity pools placement, many other services have emerged to meet institutional demand and requirements.</p>



<h4 class="wp-block-heading"><strong>Asset custody&nbsp;</strong></h4>



<p>Specialized digital asset custodians have entered the space, including BitGo, Gemini, Coinbase Custody, Copper and Anchorage Digital. Their offerings have been developed specifically for institutions, including insured cold storage custody and peer-reviewed multi-signature security.</p>



<h4 class="wp-block-heading"><strong>Crypto banking&nbsp;</strong></h4>



<p>Crypto banks such as Seba and Signum have emerged to offer solutions to institutions looking to delve into the digital assets sector.</p>



<h4 class="wp-block-heading"><strong>Over the counter markets&nbsp;</strong></h4>



<p>Institutions that have dipped their toes in crypto already tend to utilize over the counter markets rather than the centralized exchanges that individual investors use. Many providers have entered the space, including but not limited to GSR, Galaxy Digital, Genesis Block, FTX OTC and Jump Trading.</p>



<h4 class="wp-block-heading"><strong>Transaction bridging services&nbsp;</strong></h4>



<p>Web3 wallet provider Metamask has ramped up its efforts to cater to institutional business by launching Metamask Institutional. The institution-compliant wallet offers the same functionality as its original wallet but with some differentiation to facilitate optimized trade flows.</p>



<h3 class="wp-block-heading"><strong>Further reading</strong></h3>



<ul class="wp-block-list"><li><a href="https://www.bridgewater.com/research-and-insights/the-evolution-of-institutional-investors-exposure-to-cryptocurrencies-and-blockchain-technologies" target="_blank" rel="noreferrer noopener">The Evolution of Institutional Investors&#8217; Exposure to Cryptocurrencies and Blockchain Technologies.</a></li><li><a href="https://www.fidelitydigitalassets.com/bin-public/060_www_fidelity_com/documents/FDAS/2021-digital-asset-study.pdf" target="_blank" rel="noreferrer noopener">The Institutional Investor Digital Assets Study</a></li></ul>



<p>Information on various permissioned liquidity pools beyond those discussed in this guide</p>



<ul class="wp-block-list"><li><a href="https://www.maple.finance/https:/www.maple.finance/" target="_blank" rel="noreferrer noopener">Maple Finance</a> &#8211; The Maple Protocol provided institutional borrowing and fixed income lending through lending pools managed by Pool Delegates.</li><li><a href="https://alkemi.network/" target="_blank" rel="noreferrer noopener">Alkemi Network</a> &#8211; A permissioned liquidity pool facilitating programmatic borrowing and lending through a trusted institution-grade liquidity network.</li><li><a href="https://centrifuge.io/https:/centrifuge.io/" target="_blank" rel="noreferrer noopener">Centrifuge</a> &#8211; Through a <a href="https://governance.aave.com/t/the-centrifuge-rwa-market-launches-today-the-first-aave-permissioned-market/6721" target="_blank" rel="noreferrer noopener">partnership</a> with Aave, Centrifuge provides for tokenization of real-world assets, which may be accessed via permissioned pools. Businesses can tokenize trade receivables and invoices and use these real-world assets as collateral to borrow money.</li><li><a href="https://credix.finance/https:/credix.finance/" target="_blank" rel="noreferrer noopener">Credit</a> &#8211; An institutional private credit marketplace incorporating a regulatory compliant framework.</li><li><a href="https://allianceblock.io/" target="_blank" rel="noreferrer noopener">AllianceBlock</a> &#8211; Bridging TradFi with DeFi by facilitating users to prove their identity in a trustless manner and providing for a globally compliant capital market.</li></ul>



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<p><em>This Investor’s Guide was sponsored by&nbsp;<a href="https://cryptex.finance" target="_blank" rel="noreferrer noopener">Cryptex Finance</a>.</em></p>



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<h3 class="wp-block-heading">Get educated. Check out&nbsp;<a href="https://cms.blockworks.co/the-investors-guide-to-bitcoin/" target="_blank" rel="noreferrer noopener">The Investor’s Guide to AVAX</a>,&nbsp;<a href="https://cms.blockworks.co/the-investors-guide-to-music-nfts/">The Investor’s Guide to Music NFTs</a>,&nbsp;<a href="https://cms.blockworks.co/the-investors-guide-to-defi/" target="_blank" rel="noreferrer noopener">The Investor’s Guide to DeFi 2.0</a>&nbsp;and&nbsp;<a href="https://cms.blockworks.co/the-investors-guide-to-the-metaverse/" target="_blank" rel="noreferrer noopener">The Investor’s Guide to Avalanche</a>.</h3>



<p><em>The content of this webpage is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any company, product or idea. It is for general educational purposes only and does not take into account your individual needs, investment objectives or specific financial circumstances.</em></p>



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