Digital Assets Are Fixed In The Future Of Traditional Finance

Finance is undergoing a profound transformation. Whereas there was once a deep chasm separating the worlds of cryptocurrency and so-called “traditional finance”, there’s now an expansive bridge that spans the gap between them. While digital assets emerged about 16 years ago as a niche, anti-establishment movement, they have now become a vital cog in the global financial system. 

Shockingly, the convergence of crypto and TradFi hasn’t been a gradual process. It has come about rapidly, in the last couple of years, driven primarily by the evolution of pioneering cryptocurrency trading platforms like PrimeXBT, Phemex and Robinhood, among others. They’ve responded to the desire of their users for a more tightly integrated financial trading platform by breaking down decades-old barriers to facilitate the seamless flow of capital between diverse asset classes. 

Crypto exchanges have taken the lead in bridging digital assets with traditional markets primarily for reasons of convenience. By enabling users to access things like stocks and shares, foreign exchange and commodities, they’re providing countless advantages, including more seamless, digital-native trading experiences around the clock, instant transaction confirmations and lower costs. 

In doing so, they have evolved to become “all-in-one” trading hubs that can cater to every kind of investment opportunity. Let’s take a look at how they’re doing it.

Crypto as collateral for global markets

One of the earliest pacesetters is PrimeXBT. Traditionally, investors have always had to use capital within the traditional banking system to access asset classes such as stocks, foreign exchange, global indices and so on. But that limits investors to trading during market hours only, and means they have to deal with archaic financial infrastructures that result in slow and expensive transactions. PrimeXBT enables users to fund their accounts with cryptocurrency and use crypto-based account balances to gain exposure to traditional markets. After depositing supported digital assets, users can convert them within the platform into their chosen account currency, such as USDT, USDC, BTC, ETH, or USD, depending on the trading interface, and then access a range of CFD products including FX pairs, indices like the S&P 500 and Nasdaq, and commodities such as oil and gold.

This structure gives traders access to multiple asset classes and remains within a crypto-native ecosystem, without requiring an external fiat on-ramp through a traditional brokerage. The platform’s integrated exchange functionality enables both crypto-to-crypto and crypto-to-fiat conversions, in a push to support flexibility in managing account balances across different markets.

Building a global asset bridge

Another exchange helping to accelerate this trend is Phemex, which recently launched a new 24/7 TradFi futures trading hub that leverages USDT stablecoins as capital. 

The goal is to provide crypto investors with continuous access to traditional Wall Street assets through USDT-settled perpetual futures. Users can trade assets such as precious metals like gold and silver, major global equity indices and stocks such as Tesla via a crypto-native infrastructure, without ever being shut out of the markets. Compare this to traditional finance, where stock markets are only open for a limited number of hours during the daytime, and only from Monday to Friday, and it’s easy to see the advantages this provides. 

By tokenizing TradFi assets through perpetual futures, Phemex has managed to bring all of crypto’s benefits, including instant settlements, crypto-based margins and 24/7 uptime, to historic financial markets. 

Tokenizing Wall Street 

The convergence of crypto and TradFi isn’t all a one-way street. Robinhood began life as a retail-focused stock trading platform, only to evolve and embrace crypto assets several years ago. For a long time, users could trade crypto and traditional stocks on the same platform, but the two asset classes remained distinct. However, that changed last year when Robinhood announced it’s tokenizing over 2,000 U.S. stocks and ETFs for European customers. 

It’s all part of Robinhood’s ambition to capitalize on the benefits of blockchain. Tokenized stocks support fractional ownership and seamless transfers at any time of day, making them more efficient than traditional stocks bought via brokers.

Robinhood is also developing its very own blockchain for this purpose. The Robinhood Chain is actually a Layer-2 network that sits above Ethereum, and it will enable live trading and self-custody, along with integrated DeFi services. Ultimately, investors will be able to leverage their tokenized stocks in decentralized lending and yield farming platforms, in a move that dramatically advances the argument that tokenization is the inevitable future of all financial asset classes. 

Why is this happening?

Quite simply, convergence is what traders want. The vast majority of investors don’t actually care for the boundaries that separate crypto and traditional fiat. It’s not hard to imagine someone who’s primarily crypto-native, using digital assets such as USDT stablecoins as their primary source of capital. However, that trader might be guided by traditional macro-market dynamics, basing his or her trading decisions on global economic indicators such as central bank policies and interest rate hikes. Such traders are also looking at more sophisticated strategies to hedge against risk and diversify, which means allocating a portion of their portfolio to volatile digital assets and another portion to stabler asset classes like gold. 

It’s an encouraging trend because it shows that there’s not going to be one great winner-takes-all in the battle between fiat and crypto. Digital assets aren’t going to replace traditional money, they’re simply becoming just another part of the global financial ecosystem, and so it makes a lot of sense for people to be able to move seamlessly from one to another. 

An integrated financial future

This convergence heralds the dawn of an exciting new era of finance, in which any kind of asset can be held by anyone in the world, with nothing more than a digital wallet and an internet connection. The fragmentation, friction and rigid hours of the old financial system are giving way to a unified digital infrastructure that’s always on.

In future, we won’t have separate crypto exchanges and brokerages. These will give way too, replaced by the concept of an integrated financial services platform that offers seamless access to decentralized assets, tokenized securities and traditional fiat.