Crypto exchanges must evolve beyond simply facilitating buying and selling to survive bear markets and thrive in the next bull run. They need to become portals to a comprehensive financial universe, particularly with the rise of decentralized finance (DeFi). By adopting an “investment as a service” model and catering to the next generation of investors, crypto platforms can position themselves for growth and development.
Embracing Gen Z and the Future of Investing
The potential for growth in the crypto industry is immense as Gen Z embraces cryptocurrencies and seeks to put their funds to work. A recent survey found that 44% of Gen Z investors started investing with crypto, compared to 32% with stocks and 21% with mutual funds. Furthermore, 65% of Gen Z investors use financial apps and trust their guidance.
To cater to this new generation, crypto platforms should draw inspiration from traditional finance giants like Vanguard and offer curated experiences for wealth development. By adopting an “investment as a service” model, crypto exchanges can provide a comprehensive suite of financial services and products that appeal to Gen Z investors.
A Vision for the Future of Crypto Exchanges
In the future, cash could be spread across central bank digital currencies (CBDCs), cryptocurrencies, and stablecoins. Investments might include tokenized securities, funds, and assets, while liabilities could be represented as tokenized obligations. Assets, valuables, and collectibles could be represented as non-fungible tokens (NFTs) with embedded contractual documents.
However, regulatory challenges have hindered progress in this area. U.S. crypto exchanges are restricted from offering certain services like debt-based yield programs and retail-friendly staking services. To navigate these regulations, exchanges can proactively cooperate with the Securities and Exchange Commission and establish robust custody partnerships. Direct indexing platforms can also facilitate wider adoption of digital assets beyond Bitcoin and Ethereum.
Advisers and Simplifying Web3
Advisers will play a crucial role in simplifying Web3, managing client portfolios, and maximizing yield as on-chain protocols and decentralized apps proliferate. Regulatory support and index adoption that capture the nuances of crypto markets, such as proof-of-stake reward rates, are essential for the evolution of the institutional financial market.
Overcoming Regulatory Challenges
While we hope for clear regulatory guidelines, innovation in the crypto industry will continue regardless. Crypto exchanges can navigate these challenges by proactively engaging with regulators and establishing partnerships with custody providers. By doing so, they can ensure compliance while still offering a wide range of services and products to their users.
Conclusion
In conclusion, crypto exchanges must evolve to survive bear markets and capitalize on the opportunities presented by the rise of DeFi and the growing interest of Gen Z investors. By adopting an “investment as a service” model, engaging with regulators, and simplifying Web3 through advisers, crypto exchanges can position themselves for growth and development in the next bull run. The future of the crypto industry is bright, and innovation will continue despite regulatory challenges.
