Author: Omid Malekan, Professor at Columbia Business School and crypto writer; Translated by: BitpushNews
Institutions have entered the fray and are slowly embracing the advantages of on-chain technology. This is undoubtedly a positive development for those who have long hoped for deeper involvement from traditional finance. My personal view has always been: one day, all assets will become tokenized assets, and at that time, we will simply call them "assets."
It seems like there are exciting announcements every day from companies like DTCC (Depository & Clearing Corporation of the United States), Visa, SWIFT, Stripe, and PayPal. Judging from the press releases alone, these companies seem to be finally embracing real-time payments, 24/7 settlement, programmability, and atomic swaps.
But I'm not buying it.
Or rather, I don't entirely believe it. Because none of them are discussing the existential threat that "on-chain" technology poses to their existing core businesses.
Don't get me wrong, there are clearly many smart people within these companies who believe in the benefits of permissionless blockchains. I've spoken directly with them and have great respect for them. The fact that they're allowed to express their beliefs so openly implies that senior management has approved some level of substantial involvement. They wouldn't be doing this if they didn't see growth opportunities. But intriguingly, none of these leaders discuss the risks this new type of **"unowned or uncontrolled" infrastructure** poses to their traditional businesses. Public blockchains and permissionless networks are a completely new primitive. They exist to break the monopoly or oligopolistic control of traditional financial giants over old infrastructure. It's logically impossible for a network like Ethereum to take market share from existing centralized clearing and settlement networks without harming the giants who own and operate them. Let's look at these examples: 1. DTCC (Depository & Clearing Corporation of the United States) DTCC is preparing to tokenize securities currently held within its subsidiaries. This is an important first step because, by law, most publicly traded stocks in the United States are recorded on its ledger. But the ultimate state of tokenization is direct issuance on-chain, at which point the world will no longer need clearing and settlement services provided by such companies. Technically, DTCC is the CSD of the United States, or "Centralized Depository & Clearing Corporation." In a more decentralized future world, a service with "centralized" in its name will no longer be needed. But I haven't heard from DTCC's leadership that they recognize this risk. 2. SWIFT SWIFT operates a secure communication system crucial for many types of payments, especially complex cross-border payments that require an opaque network of correspondent banks. Stablecoins offer a completely different way to settle cross-border payments: lower cost, faster speed, and greater security. They pose an existential threat to the correspondent banking model that SWIFT supports. In the cryptocurrency world, payments are information itself. If all payments move to on-chain, we will no longer need a 50-year-old "messenger." However, I haven't heard any panic within SWIFT regarding this "obsolescence." 3. Visa Visa has a wide range of businesses, but at its core is operating a card organization—a trusted telecommunications layer that delivers a "payment is coming" promise to merchants so they can immediately offer products or services. Stablecoins replace this "promise" with "actual payment." Other Visa services may benefit from on-chain transactions, but bank cards are its lifeblood. I haven't seen any deeper mention of the competitive risks of stablecoins in its SEC filings, beyond a brief mention of them. 4. Stripe Stripe provides an API that allows businesses to easily integrate various payment methods. Its pricing model is primarily built on bank cards, which are notoriously difficult to process. Stablecoins simplify everything and allow new competitors to enter various payment sectors. Stripe's leadership talks a lot about what they gain from going on-chain, but never mentions what they might lose. 5. PayPal PayPal operates multiple closed-loop payment networks, earning money through interest income (float) and payment fees charged to merchants. Stablecoins have the potential to eliminate all closed-loop systems because they offer all the advantages of closed-loop systems (instant payments, free P2P transfers, etc.) without any disadvantages (like incompatibility where you use Zelle but your friend uses Venmo). Stablecoins also pay yields, putting pricing pressure on all interest-based business models. They also rarely talk about these risks. Growth Opportunities and the "Innovator's Dilemma" To reiterate: These companies can do many useful things by going on-chain, benefiting society and profiting themselves. The growth opportunities are clear. For example: DTCC can charge a small fee for token services such as minting/burning and compliance management. SWIFT's global network of bank directories and telecommunications systems can facilitate easier large-value wholesale payments. Visa has a substantial non-card business, including Visa Direct, a real-time payment service that doesn't charge card transaction fees and competes with other real-time payment services. Stripe charges a flat 1.5% fee for accepting stablecoin payments, meaning merchants pay less while Stripe gets a higher take rate – a win-win situation. PayPal's stablecoins are occasionally used in DeFi, something impossible in previous closed-loop solutions. Assessing the gains and losses for these companies going on-chain is very complex. For example, while Visa has emphasized cross-border and real-time payment solutions in recent years, Visa Direct mostly transfers money to cards, and widespread use will still increase transaction fees. Unless Visa develops a new solution that directly competes with banks, its largest customers, stablecoin-based "push-to-wallet" services will not increase its transaction fee revenue. This complexity means that these companies are unlikely to reap the benefits of cryptocurrency without making major mistakes. If the world goes entirely on-chain, their traditional businesses will inevitably be eroded, at least partially. The censorship resistance of networks like Ethereum invites endless competition, something some of these giants have never faced before. Do we really think these giants can handle the classic "innovator's dilemma"? Do we think they can transform from a multi-billion dollar monopoly/oligopoly to a regular player in a crowded market? Do we think they can beat the crypto natives who have no traditional baggage to protect? I don't think so. But why should I care? My skepticism stems partly from my experience working for or consulting at these companies. Their risk aversion is understandable. Their core businesses are led by veterans with deep experience in the field, making them skeptical of alternatives. I sympathize with their situation: if I had spent decades building a successful career on the old model, I would also be skeptical of the new one. Regardless, these executives wield far more influence internally than their younger colleagues who support cryptocurrency; they will oppose substantial progress and may even sabotage it. This is driven by their self-interest. And believing in cryptocurrency means believing that **self-interest trumps subjective intentions**. I've discussed this logic with some friends in the industry, and while they tend to agree, they're also curious why I care. As one astute friend put it: "The world's largest financial institutions are going blockchain—it's a huge achievement, something we could only dream of a few years ago. Who cares if they mess it up or just half-heartedly embrace it? Why not enjoy the present? If they mess it up, that's their problem, not ours." Unfortunately, this will become our problem. First, let me clarify that my hesitation is not out of malice, nor is it an unrealistic demand for "purity" from revolutionaries. My hesitation stems from my concern about what these large institutions will impose on the crypto industry. I fear they will wield the carrot of "mass adoption" and the stick of "regulatory capture" to force our industry to abandon the very characteristics that distinguish open, permissionless networks from the outset. This concern is not hypothetical; it is happening: JPMorgan Chase (JPM) is experimenting with permissioned tokenized deposits and money market funds, open only to "accredited investors" (i.e., millionaires). JPM is also using its vast lobbying power to prevent permissionless stablecoins from paying interest to ordinary people. DTCC's embrace of tokenization focuses on permissioned "enterprise chains," which have virtually nothing to do with cryptocurrency. They are poorly designed traditional financial databases with a lot of useless cryptographic bloat. They lack censorship resistance and offer no viability or security guarantees beyond off-chain legal agreements. They are essentially "DTCCs with added hashes." Stripe is fully supporting Tempo, a permissioned chain at launch. Making such a network permissionless will be extremely difficult, especially given the $500 million in strategic reserves and numerous traditional financial partners who must protect their own moats. I'm seeing more and more L1 and L2 business development teams weighing whether they should retract some of their initial decentralized initiatives to appease Wall Street. Crypto leaders who once scoffed at enterprise blockchain have suddenly changed their tune or become strangely silent with the rise of a new wave. Citadel Securities, while lobbying to obliterate genuine DeFi, simultaneously supports permissioned networks controlled by an enterprise consortium. This is no coincidence; Citadel is one of the smartest companies in the world, and they know exactly what they're doing. This risk of traditional financial giants attempting to undermine the core value of crypto is further amplified by the "suit-simp" phenomenon I mentioned a few weeks ago. Too many people in the crypto space are either insecure about traditional finance, too lazy to learn the unique aspects of blockchain, or have become numb and cynical because their assets are "locked in." These people are likely to betray the foundations of the industry. Conclusion As the industry's cryptocurrency, engaging with these institutions and helping them connect on-chain is crucial. We should do this with respect and understanding. The innovator's dilemma is real and difficult to overcome. But when the real challenges arise—and I guarantee they will—we should stand firm. Traditional finance needs to evolve to embrace cryptocurrency. Cryptocurrency should not regress to cater to them. In short: Don't be a "simp."
Weiliang
Miyuki
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Brian