Why TradFi Firms Have 'No Choice' But To Enter Crypto As M&A, Regulations Drive Change

Traditional finance (TradFi) institutions increasingly have limited options: adapt to digital assets or risk falling behind. At the recent Benzinga Future of Digital Assets conference, panelists discussed the forces pushing crypto integration into mainstream markets, including evolving regulations, mergers and acquisitions and demand for infrastructure.

"TradFi… they have no choice. They have to come into crypto, that's not optional anymore," said Olivier Dang, head of ventures at Laser Digital by Nomura. According to Dang, financial institutions actively hold discussions at the board level, positioning themselves to enter the crypto market as regulations take shape.

Caution Among Institutions

Despite growing pressure, many financial firms remain hesitant to take the lead. Corey Davis, managing director at BMO Capital Markets, described the situation as a race to be a “fast follower.” "There's a saying that financial institutions are in a race to be first to be second. They don't want to be the first to jump in and get into trouble," Davis said.

This reluctance has opened opportunities for crypto-native companies. As regulatory clarity removes uncertainty, Davis explained that larger firms may move to acquire smaller startups, particularly those offering infrastructure solutions like custody and compliance.

Prashant Kher, senior director at Ernst & Young LLP, echoed the sentiment, noting that traditional firms are now eyeing acquisitions over partnerships or internal builds. "We might start to see some of these tradfi firms… acquire some of these potential zombies at a discount or do some acqui-hires," Kher said, referring to companies struggling to grow or secure funding.

Valuations And Market Realities

While mergers and acquisitions are expected to increase, valuation challenges remain. Davis described a landscape filled with "zombie" companies — firms that secured funding during the 2021 market peak but have failed to deliver sufficient revenue growth.

Elliot Chun, a partner at Architect Partners, underscored the importance of readiness as market conditions improve. "One of the most important things that founders and executive teams can be doing today is putting themselves in a position for optionality in an upmarket," Chun said. He pointed to Stripe's acquisition of Bridge as a pivotal moment, describing it as the most critical transaction to date.

Major Acquisition On The Horizon

Chun also projected a significant move within 2025. "I think there will be a global, systemically important bank, a G-SIB, [that] is going to make an acquisition of a major crypto-native company by mid-2025," Chun said. He added that such a deal could trigger action from other institutions waiting to follow suit.

Infrastructure Takes Priority

For traditional financial firms, panelists agreed that infrastructure remains the central focus. Davis emphasized the importance of on-ramps, off-ramps and regulatory compliance, calling these the most attractive targets for potential acquisitions. "If you've got those two things done, there's the opportunity for you to get the big valuations by selling to a big strategic tradfi that wants to get into this business," he said.

As the panel concluded, Kher highlighted that infrastructure supporting institutional investors, such as fund administration and analytics tools, will see increasing demand as capital flows into digital assets.

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