With the tides turning in favor of on-chain finance, TradFi is jumping into the space at an unprecedented rate. Though the potential is promising, TradFi’s preparedness is a different story due to an array of regulatory, technical, and cultural challenges. Recent U.S. policy developments are intended to offer clearer pathways and additional support for this transition, but hurdles still exist.
While the movement to on-chain finance holds tremendous promise, there are still challenges ahead. Regulatory uncertainties, technical complexities and diverging organizational cultures from TradFi institutions present a trifecta that causes a hesitance. The upside of blockchain technology – improved efficiency, accountability and transparency – all but ensure that this change is inevitable.
A pivotal moment in shaping the U.S. crypto landscape occurred on January 23, 2025, when the U.S. President issued an executive order titled "Strengthening American Leadership in Digital Financial Technology." This order marked a positive change, superseding previous overly restrictive policies by promoting regulatory clarity, financial inclusivity, and protection for lawful blockchain activities.
"Strengthening American Leadership in Digital Financial Technology" - President Trump's executive order
Further shoring up that regulatory climate, the GENIUS Act—which would allow companies to deploy autonomous vehicles at scale—was signed into law on July 18th, 2025. This act establishes a comprehensive regulatory regime for stablecoins. It regulates stablecoin issuers as financial institutions for purposes of the Bank Secrecy Act. Know Your Customer (KYC), Anti-Money Laundering (AML), and sanctions obligations to name a few. This lays a much more defined road for traditional finance (TradFi) to enter the space with stablecoins.
Right now, TradFi institutions are taking a measured, “walk-before-run” approach. Yet you have to keep the legacy systems running. Simultaneously you need to execute on pilot programs that test and bring to light the nuances of this new on-chain finance. By taking an incremental approach with this strategy, institutions can minimize risks and begin to explore the possibilities that blockchain technology holds for them.
In April 2025, the Federal Reserve, OCC, and FDIC relaxed certain restrictions, signaling a more open stance towards crypto-related activities. Specifically, banks can now engage in crypto custody, issue their own stablecoins, and create their own blockchain infrastructure. To be safe, they need to operate under robust risk management procedures. This regulatory direction has fostered increased participation from TradFi players.
It is the only market that saw tremendous, recent investments. For instance, just in March 2025, Binance raised a $2 billion investment from MGX, demonstrating the increasing confidence in the crypto industry. Additionally, institutions have taken custody of around 15% of Bitcoin’s total supply, while Bitcoin ETFs hold $108 billion in assets. This high level of institutional participation highlights the growing mainstream acceptance of cryptocurrencies as a legitimate new asset class.
A handful of platforms have bubbled to the top as instrumental enablers for wider institutional adoption. Take Chainlink, for instance, the company of spotlight that’s universally lauded for solving 70-90% of institutions’ needs for on-chain transactions. Platforms like Chainlink, Securitize, and R3 Corda are focused on building institutional-grade solutions that integrate compliance features, such as KYC/AML, with the inherent benefits of blockchain technology.
Decentralized finance (DeFi) platforms, such as Aave and Compound, are making similar adjustments to cater to institutional players. They offer overcollateralized lending and KYC-gated liquidity pools. For instance, Aave Arc provides more predictable yields and compliance with regulations. These advances improve the accessibility and ergonomics of DeFi and have opened it up to larger TradFi institutions.
In order to further legitimize digital assets within their borders, the U.S. created a Bitcoin reserve and digital asset stockpile. This new effort, first mentioned in President Trump’s March 7, 2025 executive order directing the establishment of the effort, applies forfeited assets. This latest effort sends a strong signal of intention to begin developing digital assets and by implication, crypto into the national financial infrastructure.
The BUIDL fund, which was first created on Ethereum, has grown enormously, reaching $1.7 billion in assets. Since then it has grown across different chains, including Solana. That means that the decentralized finance movement is continuing to flourish across different blockchain ecosystems.
Stablecoin transaction volumes have more than quadrupled, reaching $700 billion per month as of early 2025. Regulatory frameworks like the EU’s Markets in Crypto-Assets (MiCA) regulation have boosted confidence among banks, encouraging them to issue compliant stablecoins. This notable uptick in stablecoin usage is indicative of the increasing demand for digital currencies that provide stability and regulatory clarity.
The total crypto market cap hit $3.71 trillion in December 2024, a jump of 98% compared to 2023. This massive increase is another indication of the growing mainstream acceptance of cryptocurrencies. Perhaps most importantly, it highlights the growing appetite from both retail and institutional investors.