Institutional Crypto's ETP Surge: Core Infrastructure Replaces VC as Regulations Clarify

The institutional crypto landscape is undergoing a transformation as prime brokers and settlement platforms adapt to surging demand from pension funds, hedge funds, and corporate treasuries. With regulatory clarity emerging in the U.S. and Asia, firms specializing in crypto asset management, derivatives, and blockchain-based solutions are positioning themselves as critical infrastructure for institutional investors.

Spot exchange-traded products (ETPs) and digital asset treasury services have become key entry points for institutional capital, diverting focus from traditional venture capital funding in the crypto sector. Galaxy Digital noted that high-profile investments in Bitcoin ETPs by pension funds and hedge funds indicate a shift toward liquid, regulated vehicles over early-stage VC projects. This trend aligns with the rise of corporate balance-sheet allocations, with companies like Microsoft and BlackRock joining a $40B AI-driven data center bet that includes Bitcoin mining operations.

The U.S. continues to dominate crypto institutional activity, with 47% of Q3 2025 venture capital funding flowing to U.S.-based firms. Analysts attribute this to the passage of the GENIUS Act and anticipated crypto market structure legislation under a Trump administration, which could incentivize traditional financial firms to enter the space. "The U.S. has historically led in deals and capital, and this trend is set to accelerate," said a Galaxy Digital representative.

Blockchain and AI are converging in institutional services, with firms like Yiren Digital reporting a 204% quarter-over-quarter growth in Internet insurance premiums while testing Ethereum staking solutions. Meanwhile, Solana-based treasury platforms, including Forward Industries and Upexi, collectively hold over $3 billion in SOL, leveraging decentralized finance (DeFi) to generate yield for institutional clients.

South Korean crypto exchange Upbit is preparing for a Nasdaq IPO following its merger with Naver Financial, signaling institutional validation for crypto trading platforms following a broader trend of crypto firms seeking public markets. This follows a broader trend of crypto firms seeking public markets, with Kraken and Gemini already listed and MicroStrategy (MSTR) maintaining its S&P 500 inclusion bid.

Despite optimism, hurdles remain. High interest rates and competition from AI startups continue to pressure VC allocations, while central banks caution about stablecoin risks. However, firms specializing in token security APIs, like GoPlus are seeing robust demand, with their Token Security API processing 717 million monthly calls in 2025.

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