Regulatory thaw, institutional adoption: reviewing the decade-long journey of cryptocurrency's penetration into Wall Street
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Regulatory thaw, institutional adoption: reviewing the decade-long journey of cryptocurrency's penetration into Wall Street
The U.S. Treasury and the Federal Reserve will likely coordinate more closely over the next five years, benefiting crypto assets and accelerating the integration of AI and crypto.
Navigating Web3 tides with focused insightsHost: Ryan, Bankless
Guest: Eric Peters
Editing & Translation: Janna, ChainCatcher
Eric Peters is the CEO of Coinbase Asset Management and founder of One River Asset Management. This article is derived from his podcast interview with Bankless, tracing the full evolution of the crypto market—from being seen as a gray area avoided by institutions to its gradual acceptance by Wall Street—since Eric entered the cryptocurrency space, offering a historical perspective for more crypto enthusiasts to understand industry development. ChainCatcher has edited and translated the original content.
TL&DR:
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In 2025, cryptocurrency recognition significantly increased. BlackRock's entry was a key turning point, with traditional finance figures like Larry Fink acknowledging crypto as financial infrastructure, believing it holds real value and is likely to rise in price in the future.
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Traditional finance embraces crypto not only for profit but fundamentally because blockchain solves issues of fast transactions, low cost, high transparency, and strong security, avoiding the lack of transparency that contributed to crises like the 2008 financial crisis.
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Cryptocurrency emerged from the general public rather than Wall Street, and was never incorporated into traditional regulatory frameworks, causing senior professionals at large financial institutions to adopt conservative, avoidant stances and miss the trend.
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The goal in traditional finance is to enable stablecoins to purchase digitized native forms of traditional assets such as bonds and stocks, with relevant infrastructure built on Ethereum. Industry practitioners are truly excited about the technological reconstruction of financial infrastructure, not fantasies of Bitcoin replacing the dollar.
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From 2023 to 2024, there was a crypto chokehold—crypto companies struggled to secure banking partnerships—but practitioners did not sell off their holdings, instead persisting in building. They firmly believe technological innovation cannot be fully blocked by politics, and that crypto can provide a source of truth in the AI era. The combination of Ethereum and Layer2 is viewed positively.
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The U.S. government’s stance toward crypto shifted 180 degrees within one year. The GENIUS Act was a pivotal turning point. The Hamilton Project first established a clear regulatory framework for stablecoins, starting with short-term Treasuries, then advancing integration between stablecoins and traditional financial products.
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Crypto can integrate with traditional finance by using smart contracts to retain SEC-level disclosure transparency while reducing costs associated with document processing and listings in traditional finance. Crypto technology represents the next critical step in Wall Street’s technological transformation, driving finance toward greater efficiency and lower costs.
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Crypto ETFs are successful products but contradict the decentralized custody principles of cryptocurrency. Currently, Bitcoin ETFs hold 7% of total Bitcoin supply, yet major institutions such as pension funds and sovereign wealth funds have not entered en masse.
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Four key drivers may propel the crypto industry over the next five years: 401k fund inflows, younger generations dissatisfied with traditional returns, convergence of AI and crypto, and intergenerational wealth transfer.
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Over the next five years, coordination between the U.S. Treasury and the Federal Reserve will become more evident, benefiting crypto assets along with accelerated fusion of AI and crypto. Near-term risks include treasury company liquidations and security vulnerabilities in traditional finance. However, industry infrastructure and regulatory environments have improved significantly, making catastrophic declines unlikely—though a ~30% pullback is possible.
(1) Motivations Behind Traditional Finance Entering Crypto Investment
Ryan: I’d like to talk about changes over the past five years. In 2020, you, as a well-known institutional asset manager in Connecticut, buying Bitcoin—a move considered a gray-area activity—was seen as a career risk. But by 2025, Larry Fink is publicly discussing cryptocurrency, and Bitcoin ETFs have launched. It feels like crypto has invaded Wall Street. What happened over these past five years to cause such a dramatic shift? Can you describe this process from the perspective of core industry participants?
Eric: I think BlackRock’s entry was a key turning point. Typically, someone of Larry Fink’s age and wealth might choose to retire after achieving success, but he敏锐ly realized that crypto technology could disrupt the ETF industry, so he made the bold decision to enter. Many outstanding individuals in traditional finance share similar views. These sharp investors recognize crypto because they see it as a foundational piece of financial infrastructure, upon which many more applications will inevitably be built. And when an asset has real value but few people own it, its price is highly likely to rise in the future.
Ryan: Do you think this is mainly due to a shift in mindset among traditional finance professionals, or because they can profit through tokenization, treasury companies, ETF issuance, etc.?
Eric: If traditional finance professionals didn’t see how blockchain technology could make financial systems faster, cheaper, more transparent, and more secure, they wouldn’t act—even if profit opportunities existed. Historically, many financial crises erupted either due to inefficient transactions or lack of transparency. Counterparties couldn’t assess each other’s solvency, and even many firms themselves didn’t know their own balance sheets. Blockchain technology and cryptocurrency solve exactly these problems. Therefore, the fundamental reason traditional finance accepts cryptocurrency lies in the solid value of the technology itself.
Ryan: Overall, has traditional finance broadly acknowledged that crypto will exist long-term, become an important domain, require strategic adjustments from financial institutions, and necessitate crypto-related strategies?
Eric: A defining feature of the crypto market is that cryptocurrency is the first financial innovation to emerge from the general public, not from Wall Street. Looking back at the development of the crypto industry, the issues that frustrated and provoked resistance from traditional finance professionals largely stem from its origin outside Wall Street. From day one, it wasn’t included in traditional regulatory frameworks. As a result, senior, high-ranking professionals in large financial institutions mostly adopted conservative, avoidant attitudes—thereby missing this massive trend.
(2) How Traditional Finance Understands Cryptocurrency
Ryan: Around 2016 to 2020, we thought traditional finance was beginning to understand crypto, but that was the era of “blockchain yes, Bitcoin no.” At the time, I felt traditional finance completely misunderstood—it treated crypto as merely a database or open ledger technology, but its meaning runs much deeper. Now we’re in the second wave of institutional adoption. Do they truly understand it now?
Eric: I don’t think most traditional finance professionals view cryptocurrency as money. The core reason traditional finance finally began understanding crypto is that they see stablecoins as the killer application. They don’t believe Bitcoin will replace the dollar or become the next-generation payment system. Instead, they value the tool-like qualities of crypto technology: faster, cheaper, safer, more transparent, enabling programmable money that can be pegged to sovereign currencies like the dollar, pound, or euro. Only a tiny minority in traditional finance believe Bitcoin will dominate the world—and that perception is actually healthy for the industry. Governments accumulate power and rarely give it up voluntarily, and currency creation is one of government’s core powers. Even today, I still believe governments have the ability to prevent Bitcoin from replacing the dollar.
Now, smart people in the industry have found a path to integrate crypto technology into the financial system—specifically, dollar-pegged stablecoins. With the passage of the GENIUS Act—the Guidance and Establishment of National Innovation for U.S. Stablecoin Act—stablecoin transaction volumes have even surpassed Mastercard or Visa. After stablecoin regulation became clear, the direction we’ve been pushing is enabling stablecoins to buy all traditional assets—bonds, stocks, commodities—with these assets issued in digital-native form, not just adding tokens atop paper-based database systems. What excites traditional finance practitioners is precisely this vision of technologically reconstructing financial infrastructure—not fantasies of Bitcoin replacing the dollar.
(3) Shifts in Government Regulatory Attitudes
Ryan: During the dark period of 2023 to 2024, the crypto chokehold left crypto companies shut out by banks, and the U.S. executive branch displayed outright hostility toward cryptocurrency. What were you thinking during that difficult time?
Eric: Crypto Chokehold 2.0 was real. After OneRiver was acquired by Coinbase, we tried leveraging all our traditional finance connections to build banking relationships and secure credit lines, but repeatedly hit walls. This level of government overreach completely violates ethics and democratic principles. Yet I never considered selling out and leaving—I kept building. My belief that crypto technology would ultimately replace traditional financial infrastructure never wavered. Throughout human history, technological innovation has never been permanently stopped by politics. I knew this path would be tough, but technology is always on our side. For example, eventually all financial infrastructure will be built on Ethereum, and combined with Layer2 technologies, this foundation will spawn more reliable, antifragile applications. In the AI era, crypto can also provide a source of truth, helping us distinguish what’s real, credible, and true.
Ryan: The depth of the U.S. government’s hostility toward crypto during that time surprised me, but this attitude flipped 180 degrees within just one year. Over the past 12 months, what do you consider the most significant event on the regulatory front? For instance, the signing of the GENIUS Act, crypto companies no longer being denied banking services, official statements declaring America’s ambition to become the crypto capital, the SEC’s crypto initiative under Paul Atkins, and Commissioner Hester Peirce’s push for asset tokenization. Among all these positive developments, which one matters most to you?
Eric: The current SEC chair and the crypto initiative are also excellent. The U.S. previously lacked such mechanisms. When we first entered crypto, we treated it as a macro trading instrument, but existing DeFi applications couldn’t scale to mainstream markets. So we built compliant infrastructure for issuing digital-native securities, designed to gain regulatory acceptance. We initially called this infrastructure OneBridge (meaning bridging crypto and traditional finance), later renamed Project Hamilton. We invited former SEC Chair Jay and Kevin, a member of the current Trump administration, to join our board.
My initial idea was to issue complex digital-native securities, but Jay advised starting with the simplest and safest instruments—short-term Treasuries, which are boring but safe. He believed the first step must be establishing a clear regulatory framework for stablecoins, then integrating them with traditional financial products, beginning with the most liquid and simplest tools. Once confidence and benefits are demonstrated within the financial system, expansion to more complex securities can follow. The GENIUS Act was precisely that first crucial step.
(4) The Optimal Fusion of Crypto and Traditional Finance
Ryan: In the tokenized world, there isn’t enough disclosure information. In traditional finance, information is lagging, requiring massive paperwork. Listing a treasury company on Nasdaq or NYSE can cost tens of millions in fees. With smart contracts, all of this can be digitized—preserving SEC-level transparency while cutting costs via technology. Do you think this ideal fusion is achievable?
Eric: Absolutely achievable—and that’s exactly our direction. What you’re describing is essentially crypto technology empowering the traditional financial system, not replacing it. The reason U.S. capital markets are the deepest and most liquid globally is their robust regulatory framework: investors trust that governments won’t arbitrarily seize assets, disputes are backed by regulators, and courts fairly resolve litigation. Without these, deep liquidity markets couldn’t exist. The crypto industry won’t discard these advantages but will make them more efficient. For example, $30 million in listing fees is clearly unreasonable—this won’t happen in the future. With smart contracts in financial structures, all disclosure documents can be embedded or linked directly into the contract, saving computation and storage costs while ensuring transparency.
Yes, some law firms may be unhappy about reduced fees, but looking at financial history, no industry has invested more in technology than financial services. For decades, Wall Street has used technology to transform itself: trading speeds increase while costs keep falling. Crypto technology is simply the next critical step, pushing efficiency and low cost to new heights. The optimal fusion you described—that’s the future of finance.
(5) Growth Potential of Crypto Assets Over the Next Five Years
Ryan: Let’s discuss a successful case of crypto-traditional finance integration: ETFs. How do you view how crypto-native ETFs are changing traditional financial markets? What impacts do these ETFs have on both the crypto market and traditional finance?
Eric: Crypto ETFs are indeed extremely successful products, but they contradict the decentralized custody and anti-centralization ideals of cryptocurrency. Yet their scale is enormous—Bitcoin ETFs already hold 7% of total Bitcoin supply. From my vantage point, however, truly large institutions haven’t entered en masse: major pension funds, endowments, insurers, sovereign wealth funds. The big institutions I’ve worked with throughout my career still haven’t genuinely engaged with crypto. They missed earlier opportunities and now face severe cognitive dissonance. In 2021, many top global institutions formed digital asset working groups to explore entry. But then the crypto bear market hit, and all plans were completely halted. Now that crypto prices have rebounded, they simply can’t catch up fast enough. For these professional investors, the first step today is investing in infrastructure and funding crypto venture capital—not direct crypto purchases.
But this is good for the market—you can clearly see who will buy at higher prices down the road. These institutions will gradually enter, likely increasing infrastructure investments first, and eventually holding meaningful amounts of crypto tokens. Not to replace the dollar, but as part of monetary backing—like gold or other commodities. These narratives will ultimately attract more large institutions to enter at higher prices. So today’s institutional absence actually makes the future more promising.
Ryan: How high do you think prices of crypto assets like Bitcoin and Ethereum can go? Where are we in this journey?
Eric: When I entered crypto at the end of 2020, I set a 10-year investment horizon. Now it seems we might not need that long, but back then I believed it would take about 10 years to largely dispel misconceptions about crypto assets, and another 10 years to build infrastructure and eliminate access friction. In 10 years, valuation logic for crypto assets will converge with other assets in the economy. Right now, we’re midway through that 10-year cycle, given all the progress—including stablecoin legislation passing and the next steps like onboarding traditional assets onto blockchains.
The core logic of the crypto market is supply-and-demand driven, but structural frictions remain. For example, Trump recently signed an executive order allowing 401k plans to allocate to crypto assets. This means buyer-side friction will continue to decrease, leading to sustained capital inflows and rising prices. More importantly, the crypto market is reflexive. Take Bitcoin—it has no fixed anchor, and no mature valuation model exists today. Over the next five years, multiple themes will jointly drive the crypto market: first, 401k fund inflows; second, income inequality and younger generations dissatisfied with the 7% annual returns from traditional index funds, preferring to chase 100x-return crypto assets; third, the convergence of AI and crypto—AI needs crypto to verify authenticity, and high-speed financial interactions between AI agents require decentralized crypto payment systems; fourth, wealth transfer from baby boomers to younger generations. These overlapping themes could trigger extreme market movements.
From a probabilistic standpoint, I believe there’s a 25% chance Bitcoin experiences bubble-like explosive growth over the next five years—reduced entry friction and passive capital inflows could push prices sharply higher. A 50% chance Bitcoin trades between $50,000 and $250,000. And a 25% chance it falls below that range, possibly due to unforeseen risk events—though this probability may actually be even lower. Ethereum is more of a transactional asset: the higher Ethereum’s price, the higher on-chain transaction costs become, which drives innovation in Layer2 and other technologies to reduce costs—potentially capping Ethereum’s price and making its volatility more pronounced.
(6) Macro Trends in Crypto Investing Over the Next Five Years
Ryan: Do you see crypto treasury companies as bullish or bearish for the market? Are there risks involved?
Eric: I think these treasury companies are unhealthy in the long run, but currently they’re still early-stage and haven’t caused substantial harm. Vitalik’s previous answer on this was spot-on—he said these companies are essentially creating hybrids of options and derivatives on top of crypto assets. Wall Street tends to financialize, leverage, and amplify any asset. These treasury companies are already using various tools for leveraged operations, which work well in the short term. But long-term risks exist: Wall Street might embed excessive leverage into these companies while charging high management fees, harming retail investors. And if the market sees a 30% pullback, high leverage could trigger cascading liquidations, damaging the credibility of underlying crypto assets. Still, these companies are small now and don’t pose systemic risk.
Ryan: Returning to your 10-year crypto investment cycle—five years have passed. For the remaining five years, what certain macro trends do you see supporting crypto assets? Which trends are you confident enough to bet on?
Eric: First, coordination between the U.S. Treasury and the Federal Reserve will become more visible and explicit. When debt levels are too high and interest payments are determined by Fed policy, the government has strong incentives to blend fiscal and monetary policies. The core logic favoring crypto here is fiscal dominance: facing massive debt, governments will opt for mild inflation to erode debt—stimulating rapid economic growth while keeping rates low, effectively taxing savers. Low real interest rate environments have historically favored non-income-generating risk assets like crypto, and this trend will persist.
Second, the fusion of AI and crypto will accelerate—an exceptionally rare technological resonance in economic history. AI has the potential to dramatically boost productivity in the U.S. and globally, enabling high growth with low interest rates, creating conditions for inflation-driven debt erosion. At the same time, AI needs crypto to verify content authenticity—using blockchain to authenticate videos and data—and high-speed financial interactions between AI agents require intermediary-free crypto payment systems. This technological synergy will greatly increase real demand for crypto assets. Additionally, compliant innovation initiated by the GENIUS Act will continue, with traditional assets moving on-chain and stablecoins becoming widespread, progressively eliminating usage friction for crypto assets—all long-term tailwinds for the crypto market.
Ryan: But all of this seems too clear, too straightforward—making me wonder if we’re overlooking risks. What risks could potentially overturn these optimistic expectations?
Eric: There are two main short-term risks: first, liquidation risk from highly leveraged treasury companies. If one becomes too large and overly leveraged, a 30% market pullback could trigger cascading liquidations, potentially causing crypto prices to drop 70–90%, damaging the credibility of underlying assets. Currently these firms are small, but in 2–3 years they could become a risk. Second, security vulnerabilities after traditional finance enters—some institutions may build their own infrastructure without adequate security, leading to large-scale hacks or thefts, undermining market confidence. Overall, a ~30% correction in crypto markets over the next five years is inevitable, but the likelihood of a catastrophic collapse is very low. Today’s industry infrastructure, regulatory environment, and institutional acceptance are far stronger than in previous cycles.
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