Even though one of the largest crypto exchanges, FTX, collapsed and filed for bankruptcy, some market participants aren’t worried about whether the meltdown will alter institutional interest in crypto.
“I feel like once you get the momentum for an institution up and running, it’s hard to get them to turn their head and pivot,” Grace Berkery, director of startup engagement at Mastercard, said at the Benzinga’s Future of Crypto event. “So if they’re going to enter, they’re going to stay in the space.”
During the “Status of Venture Funding in Crypto and Web3” panel, Berkery said that she doesn’t think institutions are going to shy away from the industry but instead will focus on becoming more careful about their diligence and who they partner with, as well as working with companies with proven track records and existing customers. “The focus is going to be less on buzzwords and hype in the space and more on what is the tangible value you’re adding as a company.”
Mastercard is no stranger to the crypto industry and has been supporting it for years through investments and initiatives like bridging banks to provide the ability to offer cryptocurrency trading to clients. It’s also partnered with crypto firms like Binance, Nexo and Gemini to launch Mastercard-affiliated crypto cards.
“I think it’s an opportunity and time to reset,” Berkery said. “At Mastercard, we believe there’s a lot of promise in the underlying technology. There’s a lot happening in the space.”
Berkery said there are “definitely” still opportunities for institutions to partner with crypto companies.
“We take a partnership-first approach,” Berkery said. “We’re not experts in the space. [We ask,] ‘How can we partner with you to bring what we know as a traditional financial institution and mix that with the web3 space?’”
Over the next 12 months, topics that will be top-of-mind for traditional financial institutions include value-added services like cybersecurity, fraud analytics, identity management and others that can “really help stabilize the market,” Berkery said.
She also thinks utility NFTs and metaverse-based use cases will continue to be a big area for investors and institutional involvement, specifically with a focus on how to approach traditional consumers through loyalty use cases and increased customer engagement.
“Nothing is off the table,” Berkery said. “It really comes down to how you’re going to bring value to these traditional companies and institutions.”
The need for institutional involvement in digital assets is disputed in crypto communities. While some believe the involvement could boost the overall value of the crypto market, drive new use cases and grow adoption, others believe that institutional participation could impede decentralization and inhibit innovation due to leaning on existing regulatory frameworks that old-school finance has to abide by, among other things.
While a handful of financial institutions have gotten into crypto over the past few years, the pace has ramped up in the past 12 to 24 months. In July, market players told TechCrunch that there’s significant institutional interest in decentralized finance, and even prior to FTX’s collapse, institutional interest hasn’t “wavered one inch,” even though crypto assets are trading well below all-time highs.
Time will tell how and whether institutions enter the space at the same cadence that they have in the recent past.