Building Institutional Trust in a Decentralized World

A recent JP Morgan survey found that 71% of institutional traders have no plans to engage with crypto in the next five years. This hesitation reflects not a lack of interest, but a lack of institutional readiness. For many investors, blockchain still feels more conceptual than practical.

Yet the momentum is undeniable. Crypto ETFs are entering mainstream portfolios. Sovereign wealth funds are running pilots with tokenized settlements. And Bitcoin is increasingly positioned as a digital macro hedge and store of value.

The question is not whether blockchain can unlock new financial models, but whether it can meet the standards that institutions require. Without performance, reliability, compliance, and usability, real adoption will continue to lag.

It's time to move from experimentation to infrastructure.

Reframing Expectations

One of blockchain's core challenges lies in its foundational layers. Thus far, Layer  1 blockchains have been limited by foundational trade-offs, where efforts to optimize for throughput or latency often compromise decentralization or security, and by rigid protocol architectures that hinder seamless upgrades, compliance integration, and interoperability with legacy systems.  Ethereum is a key example. Its scaling roadmap, which includes rollups, sharding, and external data layers, reflects the difficulty of overcoming those foundational limitations. This workaround-based approach has led to architectural fragmentation and operational complexity, which poses challenges for seamless integration.

Rather than building on top of incomplete layers, the industry must commit to base infrastructure that is scalable, resilient, and compliant-ready from the outset. Only with this foundation can decentralization move beyond principle to institutional reality. 

Meeting this bar requires infrastructure that delivers predictability and robustness. Too often, today's implementations fall short. A more practical, systems-oriented approach is needed, one that favors integration and interoperability over abstraction.

Decentralized systems hold clear promise, but institutions will only engage when those systems are reliable, streamlined, and compatible with real-world operations.

Security Must Be Structural, Not Assumed

Security cannot be an afterthought. In institutional finance, where transactions involve sensitive data and high-value assets, systems must be designed with the assumption of persistent and sophisticated threats. Yet many blockchain networks today operate with security models developed for open experimentation, not institutional rigor.

Meeting this bar means adopting hardened architectures, building in redundancy, and ensuring that system integrity can be preserved under stress. In critical infrastructure, "secure enough" is never enough.

Experimentation Isn't Infrastructure

The decentralized finance (DeFi) space has generated creative approaches to trading, lending, and liquidity. But much of that experimentation lacks the controls, protections, and regulatory clarity needed for institutional engagement. Liquidity pools, for example, expose participants to significant downside risk without the guardrails that professional investors expect. In January 2024, a vulnerability in KyberSwap's Elastic liquidity pools was exploited in a $46 million attack, prompting the protocol to suspend operations and warn liquidity providers to withdraw funds. The incident demonstrated how even widely used platforms can expose users to major vulnerabilities when core security practices break down, underscoring the need for more rigorous design and testing standards.

Protocols like Uniswap and Curve have pioneered decentralized exchange models that drive much of today's DeFi activity. But they remain largely outside regulated frameworks and often operate without the transparency, disclosures, or protections that institutional investors expect. To gain broader trust, innovation must evolve into systems that support auditability, accountability, and compliance with regulatory and fiduciary standards.

Making Blockchain Usable

Technology adoption at the institutional level depends not only on capability, but on usability. Systems that require radical shifts in behavior or infrastructure are unlikely to gain traction. Blockchain's strength lies not in replacing existing financial architecture, but in enhancing it—streamlining operations, improving transparency, and reducing friction within familiar frameworks.

For institutions, the most viable solutions are those that integrate seamlessly into existing workflows, compliance systems, and client-facing platforms. By emphasizing compatibility over disruption, blockchain can serve as an enabling layer—enhancing core services while also unlocking access to new customer segments previously underserved by traditional finance. In doing so, it becomes a tool not just for efficiency, but for inclusion.

Building for Real-World Value

To support institutional trust, blockchain systems must be engineered with:

• Performance that scales to institutional volumes and latency standards
• Security frameworks that assume real and persistent threats
• Governance that aligns with legal and fiduciary responsibilities
• Integration pathways with core financial infrastructure and compliance tooling

These requirements are not prohibitive. But they do demand a shift in approach—from proving the viability of blockchain, to delivering it as enterprise-grade infrastructure.

Trust Must be Earned to Move Forward

Institutional trust is not built through ambition alone. It is earned through systems that are reliable, transparent, and capable of supporting real-world financial functions. The blockchain space has made impressive strides, but the next phase requires a deeper commitment to the standards that institutions live by.

But momentum is building and examples are beginning to emerge. BlackRock launched a tokenized U.S. Treasury fund on the Ethereum blockchain, signaling serious intent from traditional finance to explore public chain infrastructure. Kinexys, JPMorgan's blockchain platform, supports blockchain-based settlement and intraday repo transactions, reflecting scaled enterprise use of digital assets. 

These projects point toward a more mature phase of adoption. But to continue progress, the ecosystem must demonstrate not only performance and compliance at scale but also consistency, reliability, and integration with existing financial infrastructure. Institutions will not onboard solutions that operate in silos or require major operational overhauls. Success will depend on the ability to deliver seamless experiences that match the risk, governance, and operational expectations already embedded in capital markets. With that focus, blockchain can transition from experimentation to essential utility—becoming not a parallel innovation, but a core pillar of the financial system.