Institutional Crypto in 2025 - what to watch

Institutional crypto refers to the large-scale trades executed by institutions, rather than by individual traders and retail customers. This institutional side to the crypto industry has been increasing year on year, and 2024 was no different. As the ecosystem of institutional entities evolves into the new year, here are 3 key themes to keep an eye on - three things that will likely impact how institutional crypto grows and develops in the next 12 months. 

Regulation

At both a national and international level, governments and regulators are being asked what is or isn’t allowed with regards to crypto. Regulatory change does not just affect the individual user, it impacts institutional as well. Institutional crypto is often even more affected by regulations because it involves large amounts of other people's assets, and often cross-border transactions. These cross-border transactions are very vulnerable to changes in regulatory frameworks because even within economic regions, neighboring nations cannot always agree on the details of how to send and receive crypto. 

CBDCs and stablecoins, and the regulations that surround them, will be just as important to institutional crypto in 2025. Regulatory rules around these assets, as well as changes such as the approval of spot Bitcoin ETFs in the USA, will be vital to the development of institutional crypto. 
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Adoption 

Institutional crypto is increasing in popularity. Keeping an eye on adoption rates and user education will be an interesting way to track its development throughout the year. With increasing institutional participation, the market becomes more mature and evolves better infrastructure and technology (as detailed below). How is adoption going? This absrbd report from the beginning of last year cites a study that shows ‘over 70% of institutional investors [are] indicating plans to invest in digital assets in 2024.’ As crypto’s reputation moves from the ‘Wild West’ to a diverse, advantageous digital asset, institutions’ 'interest' will change to 'adoption'. That reputation will rest on the other key factors we detail: regulation and technology/infrastructure evolution. With better regulations that promote a healthy crypto market, and keeps customers safe, as well as advanced technology and infrastructure, institutional crypto will find a smoother path to adoption.

Outside of this ‘interest’ mentioned in that report, there is some more concrete evidence that adoption is speeding up: major financial institutions such as Goldman Sachs and Fidelity both launched major crypto trading services in 2024
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Technological and infrastructure evolution 

Technology has taken huge leaps in crypto, especially in areas such as layer-2 solutions and smart contracts. Layer 2 solutions are protocols built on top of existing blockchains, offloading some transaction processes from the main chain, and enabling faster and cheaper transactions. On top of this, layer 3 solutions have emerged that further enhance the usability and scalability of the blockchain ecosystem, making it quicker, more efficient, and cheaper to transact on the blockchain. All of this means that institutions will no longer have to invest as much as money as previously into cumbersome, easily outdated technologies or infrastructure that allows them safe access to crypto. It will be easier, quicker, and cheaper to step into that ecosystem.

Safety features such as layer 2 solutions, custody solutions, and risk management tools, have all been developing, creating a safer environment for institutions to interact with. This is crucial for the institutional adoption of crypto. Safety is essential for institutions incorporating crypto, as they have reputation and risk management considerations way above retail. 

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The 2025 key factors

The key factors listed above are 'what to watch' in 2025. Within these three areas, we will be able to understand what changes will happen in the coming months. It also helps to identify existing pain points and barriers to adoption. Institutional crypto is a largely untapped market in some parts of the world, either due to lack of infrastructure, or regulatory issues, or sometimes even non-existent. For example, in early January, South Korea announced potentially lifting the ban on institutional investors being involved in crypto trading. With these bans being lifted, the three factors listed above will be especially crucial to not just developing institutional crypto, but building it from the ground up.