The so-called "on-chain" approach of traditional financial institutions is often a betrayal of the spirit of decentralization. A true crypto revolution must transcend existing power structures.
Written by: Omid Malekan
Compiled by: AididiaoJP, Foresight News
This is a warning: as traditional finance increasingly embraces blockchain, the actions of the largest financial intermediaries may very well be foreshadowing future failures. The more enthusiastically they embrace a particular form of the crypto world, the less likely that form is to truly succeed.
Those giant exchanges, clearinghouses, banks, brokers, and payment providers. These household names will make headlines in the coming year for their "cautious" embrace of blockchain.
The way these institutions "go on-chain" primarily reflects their desire to maintain their power and profits, rather than revealing some truth about the future of crypto.
This is not a critique of these institutions, nor is it some kind of ideological conspiracy theory. First, it's an extension of a core principle that underpins the entire crypto world: incentives determine behavior. Second, it acknowledges a fundamental contradiction that the leaders of all these institutions must confront and resolve.
Their power and profits stem from their central position within the "pipeline" of financial infrastructure. A combination of system design and regulatory moats allows them to reap enormous profits in an environment with virtually no competition. The architecture of traditional finance created a specific "pipeline system," and they control the key pipelines. For decades, they have been consolidating this control.
The U.S. Depository & Clearing Corporation (DTCC) has been established for 53 years, Visa for 67 years, SWIFT for over 50 years, and even the largest banks have histories spanning hundreds of years.
The current managers of these institutions have never faced a real existential threat in their careers. Yes, Visa and Mastercard compete in the high-end credit card market, and big banks vie for rankings in foreign exchange trading volume, but their leaders have never worried about being completely eliminated, never.
These companies' market capitalization of trillions of dollars, revenue of hundreds of billions of dollars, and executives' tens of millions of dollars in compensation all stem from a single fact: there is only one financial system, and their position within it is almost rock-solid.
Then, the crypto world emerged. This is the second, and currently completely independent, system. Moreover, its core goal is to change the architecture of finance, creating a crucial "pipeline" that is not private to anyone, but open to everyone—a "pipeline system."
The censorship resistance of decentralized systems protects not only users but also builders and competitors. This characteristic ensures competitive liquidity that has long disappeared in traditional finance.
Any entrepreneur can access Ethereum to process payments, or even go further and build their own payment service. But almost no entrepreneur can access the Federal Reserve's Fedwire system. Therefore, to start a company and compete with agent banks like JPMorgan Chase, you must first become a JPMorgan Chase client.
Similarly, any tokenization startup globally can access permissionless blockchains like Ethereum. However, no startup can access the National Securities Clearing Corporation (NSCC), a subsidiary of the U.S. Depository and Clearing Corporation (DTCC) and the core of U.S. stock clearing. Startups can only use this infrastructure through clearing brokers like Bank of New York Mellon (BNY).
Now guess who owns and manages DTCC? The answer is clearing brokers like Bank of New York Mellon.
Most people don't realize how anti-competitive the core "pipeline" of traditional finance is. If we compare it to the internet, it's like a few companies like Google and Amazon own all the web servers, and the only way to compete with them in advertising or e-commerce is to pay them.
So, now that the crypto world has become so important that it can no longer be ignored, what will these industry giants, who have huge profits, are no longer used to competition, and whose positions are secure, do?
Would they willingly relinquish power and profits? Would they willingly jump from a comfortable environment with all the infrastructure and no competitive pressure into a fiercely competitive "hell"? Would they lower a drawbridge over their efficient moat, inviting intruders in? Would they decide to earn less, watch the stock price fall, and take on fewer bonuses?
I don't think so.
But don't just listen to me. Put yourself in their shoes and imagine what the smart people who run these institutions would be thinking.
You run a subsidiary of DTCC, arguably one of the most centralized companies on Earth, its monopoly protected by half a century of securities laws. Would you embrace a tokenization scheme built on Ethereum, a platform where anyone can compete with you? Or would you wholeheartedly support a blockchain whose leadership has been showering you with sweet talk for years?
"My chain is permissioned. I decide who can verify transactions, who can use it, how much the fees are, who can view the data, and even the supply of my native token. I have all the power. I can invite anyone to join my network, but I chose you..."
Now, put yourself in the shoes of the leader of the largest traditional financial exchanges and payment processors. Would you choose to embrace the crypto version that someone like me envisions? A decentralized, censorship-resistant version that allows everyone from crypto-native startups to non-financial giants (Google? Meta? Walmart?) to compete head-on with you?
Or will you embrace the version based on the premise that "your company is crucial today and must be so in the future"?
"I've worked in your industry for decades. I wear the same suits and Patagonia vests as you. I know what you need, and I've designed a centralized blockchain that allows you to maintain power and dominance. My goal isn't to disrupt or replace you, but to help you improve efficiency."
Traditional financial institutions are large and bureaucratic. They employ many bright people, some of whom genuinely "understand" the social benefits of permissionless infrastructure, smart contracts, and tokenization. But their leaders have risen to their positions precisely because they have embraced and mastered the path of centralization.
So, what if you were the CEO of one of the world's largest banks, sitting atop a brand-new skyscraper? For years, you've publicly opposed cryptocurrencies, calling them tools of fraud and crime. Some of your younger executives disagree, bullish on Bitcoin, Ethereum, and Solana, hoping the company will move in that direction. But then, a more senior, higher-ranking executive proposes an alternative:
"Blockchain technology is good, but decentralization is bad. Let us build or control a centralized blockchain for our clients. We can provide tokens and smart contracts, but everything is under our control. We are the greatest bank in the world. True social well-being comes from our control."
As a CEO, which one would you choose?
As 2025 draws to a close, my final piece of advice to everyone is: be wary of the "signals" these institutions are trying to send during the "on-chain" process. The "encrypted version" they embrace, support, fund, and lobby for may not be the one that ultimately prevails.
I am convinced that the vision they cherish is doomed to fail.
If you want to be a "suit-wearing fanatic," go ahead, but history won't praise you for it. Without decentralized blockchain, it's meaningless.
This isn't to say that centralization itself is bad, or must be abolished in all areas. Rather, it's that it's not on-chain. It doesn't matter that the leaders of the largest traditional financial institutions don't think this way. To defend them: they're simply protecting their own interests.
So, what is your excuse?
As traditional finance gradually moves onto the blockchain, the actions of the largest intermediaries are precisely a counter-indicator of the future. The more enthusiastically they embrace a particular form of the crypto world, the less likely that form is to succeed.
The future will be completely different from the past.
