Obstacles to Institutional Adoption of Cryptocurrencies : altcoin


So, yes, we’ve emerged at the main topic that we should all be considering: how to increase crypto adoption.

In recent years, institutions, SMEs, and even digital banks have been seen entering the crypto space. We can speculate why, but I’d like to argue why not.

To begin with, crypto and defi were designed to outperform centralized finance, that is, to do everything cefi cannot, such as offer higher APYs, better staking services, lending, and so on.

So far, even banks and other traditional financial institutions have labeled cryptocurrency as a scam, possibly due to its lack of regulation, security risks, and scalability.

But as time passed, they realized they were wrong, that cryptocurrency is the future of finance, and they now want to invest in it.

JP Morgan, for example, recently launched a cryptocurrency exposure basket of Bitcoin proxy stocks as an investment option for its clients, and Visa and PayPal have also recently opened Bitcoin transactions on their platforms, bringing hundreds of millions of new users into contact with cryptocurrencies.

Everything now simply comes down to the topic of the day: what are the challenges that institutional investors face when investing in crypto and Defi, and what are possible solutions to those challenges.

Let’s get started now, shall we?

Established institutions, such as banks, hedge funds, and investment firms, face a number of challenges, including:

Centralization Risks: Traditional, centralized financial institutions can unilaterally approve and execute transactions, but in decentralized finance, the network’s governance and consensus algorithm approves transactions. This can pose a serious adoption hurdle for centralized organizations that are unfamiliar with decentralized approval processes.

Smart Contract/Security Risks: The key signing technologies used for blockchain security that make it harder to attack the system and execute fraudulent or unapproved transactions do not directly integrate with the transaction approval protocols of traditional finance.

Also, smart contract vulnerabilities and exploits can lead to massive losses of user funds unless these contracts and related systems and operations are thoroughly tested and routinely upgraded and maintained.

Scalability: DeFi applications are designed for quick rollout and performant scaling to large numbers of users. Quickly onboarding new users and delivering robust offerings to them with traditional financial infrastructures is next to impossible.

Financial Risks: Financial risks pertaining to the volatility of collateralized assets and borrowing/profit rates must also be managed, which can be difficult to do given the notorious volatility of the crypto space. It is of little use to take user funds and make a loss, or to invest funds in assets that deliver mediocre returns when the rest of the market is performing well.

Regulatory/Compliance: A lack of clarity in terms of compliance and regulation makes it difficult for traditional financial services organizations to enter and operate in new markets while remaining compliant with applicable rules and laws. This is particularly important when it comes to overcoming the tax and KYC/AML hurdles and implications of offering financial services to the unbanked.

With that said, there are a few crypto custodian solutions available that aim to enable enterprises and institutional to manage and invest in DeFi and Crypto Markets in a seamless manner. The likes of UnidoEP which will be my main focus for this write up

Unido, the enterprise blockchain platform for decentralized capital markets, was designed to help these institutions overcome these issues by bridging the gaps between cryptocurrency-powered DeFi and traditional, fiat-based finance.

With Unido, financial services companies can securely manage their assets. Unido also provides access to DeFi networks, institutional compliance and governance services, and a holistic view of wallets, customers, and assets to empower better investment, management, and trade decisions. Unido also helps banks, brokers, and exchanges provide crypto banking facilities to their customers. As a stand-alone crypto bank, Unido easily integrates with legacy fiat systems and centralized CRMs, providing users with cryptocurrency risk management and blockchain security services.



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