The Institutional Shift Beneath the Surface

The institutionalization of crypto may be the least important part of what institutions are doing with it.

For years, the institutional crypto story was easy to understand. Bitcoin became an asset class. ETFs arrived. BlackRock and Fidelity entered the market.

Banks began offering digital asset services. Traditional finance, after years of resistance, was finally accepting that crypto was not going away.

That is the part everyone can see.

Underneath it, something much larger has been taking shape.

Financial institutions are beginning to put parts of the financial system itself onchain.

Money market funds. Treasury exposure. Settlement. Collateral. Ownership records. Payments.

The technology is moving beyond the asset and into the machinery around the asset.

I started thinking about this after going down a rabbit hole around Jane Street.

If you are deep enough in financial markets or crypto, you must have probably come across the name. Outside those circles, probably not.

Jane Street is one of the world’s largest quantitative trading and market making firms.

It operates in a part of finance that rarely gets public attention: pricing markets, providing liquidity, finding arbitrage opportunities and using sophisticated systems to move faster than most participants ever could.

That world also produced people who would later become deeply involved in crypto.

Sam Bankman-Fried worked at Jane Street before founding Alameda Research.

Caroline Ellison also worked at Jane Street before joining Alameda. Alameda’s early business was heavily based around cryptocurrency arbitrage.

That does not make Jane Street responsible for what happened at FTX. It does show how quickly expertise developed inside traditional financial markets could migrate into a new, fragmented market like crypto.

Crypto offered a different kind of trading environment. Markets ran around the clock. Liquidity was fragmented across venues.

Assets could move between platforms without the traditional settlement infrastructure sitting underneath them. Price discrepancies could appear and disappear quickly.

For people trained to find inefficiencies in markets, there was a lot to work with.

Then there is the uncomfortable side of that sophistication.

In 2025, India’s securities regulator, SEBI, accused Jane Street entities of manipulating the Nifty 50 index through trading activity around derivatives expiry.

Jane Street disputed the allegations. SEBI’s order itself makes an important distinction between legitimate arbitrage, hedging and directional trading and activity that it considered manipulative.

That distinction is where things get uncomfortable.

Arbitrage is built around exploiting differences in price. Market making is built around providing liquidity. Neither requires manipulation.

But when a participant becomes sophisticated enough, large enough and fast enough to materially influence the market it is trading, the line between exploiting an inefficiency and influencing the conditions around that inefficiency becomes much harder to ignore.

That question did not begin with crypto. Crypto simply made many of these market structure problems more visible.

And while people were debating whether institutions would eventually accept crypto, some of those institutions were already experimenting with the infrastructure underneath it.

J.P. Morgan is a good example.

The bank began working on blockchain infrastructure years before the current institutional crypto cycle.

Its Kinexys business now says it has processed more than $4 trillion in transactions since inception, with billions of dollars moving through the system every day.

This is not a bank putting out a blockchain proof of concept and waiting to see whether anyone cares.

It is financial infrastructure being used for payments, tokenization, settlement and collateral.

Franklin Templeton went down a similar path.

Its Franklin OnChain U.S. Government Money Fund launched in 2021, using a public blockchain to record transactions and share ownership.

The fund became an early example of something that would have sounded strange in traditional finance a few years earlier: a regulated money market fund represented and administered through blockchain infrastructure.

BlackRock has since taken the idea further.

Its tokenized money market products and onchain share classes are putting traditional financial products onto blockchain networks.

Some of those products use infrastructure connected to J.P. Morgan’s Kinexys and Ethereum.

At that point, the conversation changes.

These institutions are not simply putting crypto into traditional finance.

They are putting traditional finance onto infrastructure that came out of crypto.

That is a much bigger shift.

A Treasury fund does not become a crypto asset simply because its ownership is represented onchain.

A money market fund does not stop being a regulated financial product because its shares can move through blockchain infrastructure.

The underlying financial product can remain familiar while the machinery around it changes.

That is what makes this transition easy to miss.

People naturally watch the asset.

They watch Bitcoin’s price. They watch ETF inflows. They watch which institutions bought how much.

Far less attention goes to the rails underneath.

Who settles the transaction?

Where is ownership recorded?

How is collateral moved?

How quickly can an asset settle?

Who controls access?

Can the asset interact with another financial system without being converted back into the old format?

Those are infrastructure questions.

And institutions are already answering some of them with blockchain systems.

The institutionalization of crypto, then, may be only the visible layer of a much larger transition.

The Bitcoin ETF is easy to understand. A traditional investor can gain exposure to Bitcoin through a familiar financial wrapper.

A tokenized Treasury fund is more subtle.

A bank using blockchain infrastructure for settlement is more subtle.

A regulated financial product whose ownership exists onchain is more subtle.

None of these developments require traditional finance to suddenly become crypto native.

They require something more consequential: traditional financial institutions deciding that some of the underlying properties of blockchain infrastructure are useful enough to incorporate into the systems they already operate.

That is why I am less interested in asking whether crypto has finally gone mainstream.

It obviously has.

The better question is what happens when the institutions that already understand financial markets at an extraordinary level begin rebuilding parts of those markets with programmable infrastructure.

The public sees the ETFs.

The institutions are building the rails.

And by the time the infrastructure becomes obvious to everyone else, the financial system built on top of it may already look very different from the one we have now.