Wall Street’s appetite for cryptocurrencies is stronger than ever. BlackRock’s Bitcoin ETF has broken inflow records. Fidelity and VanEck have followed suit with new spot products. Even Nasdaq has hinted that it will expand its digital asset trading infrastructure. Yet despite all this momentum, almost none of this is happening on-chain.
Institutions now treat cryptocurrencies as a legitimate asset class, but not as a place to operate. Most trading, settlement and market making still take place on private servers and traditional rails.
The reason is simple: blockchains, in their current form, do not yet meet institutional performance standards. Until they can offer predictable speed, reliable data access, and operational resilience on par with Wall Street systems, the largest players will continue to trade off-chain, limiting transparency, liquidity, and the same innovation that made cryptocurrencies attractive in the first place.
Why order flow stays off-chain
Institutions avoid trading on chains because most blockchains do not meet their standards. Institutions require speed and reliability, and blockchains tend to struggle with the latter.
Many blockchains become congested under peak stress, causing transactions to fail unpredictably. Gas rates can change erratically as network activity fluctuates, introducing additional chaos. Institutions refuse to operate in such an unpredictable environment.
Institutions must also ensure, without a doubt, that trades will be settled correctly, even when many things happen at once. Some blockchains, such as Layer 2 or rollup ones, rely on optimistic settlement techniques that work most of the time, but sometimes require transactions to be rolled back, reversing settled transactions.
Within these limitations, institutions must ensure that they can trade as quickly as possible. In traditional markets, institutions have paid millions to shorten the length of the fiber optic cable between them and the Nasdaq, allowing them to settle trades a nanosecond ahead of their competitors. Blockchain latency is still seconds or even minutes, which is not competitive at all.
It is important to note that modern institutions have access to crypto ETFs, allowing them to purchase crypto exposure through traditional markets using the optimized fiber optic cables they are familiar with. This means that to attract institutional on-chain trading, a blockchain must surpass the speeds of traditional markets (why would institutions switch to a slower trading venue?).
Updating blockchains to institutional standards
Institutions will not simply create a Metamask wallet and start trading on Ethereum. They require custom blockchains built to meet the same performance, reliability, and accountability standards as traditional marketplaces.
A key optimization is instruction-level parallelism with deterministic conflict resolution. In simple terms, this means that a blockchain can process many transactions at once (such as multiple cashiers calling customers in parallel) while ensuring that everyone’s receipt comes out correct and in the correct order every time. Prevents “traffic jams” that cause blockchains to slow down when activity increases.
Blockchains designed for institutions should also eliminate I/O bottlenecks, ensuring that the system does not waste time waiting for storage or network delays. Institutions must be able to perform many simultaneous operations without creating storage conflicts or network congestion.
To make integration more seamless, blockchains should support plug-in connectivity independent of virtual machines, allowing institutions to connect existing business software without having to rewrite code or rebuild entire systems.
Before committing to on-chain commerce, institutions require proof that blockchain systems work under real-world conditions. Blockchains can alleviate these concerns by publishing performance data measured on real hardware, using realistic payments, DeFi, and high-volume transaction workloads, for institutions to verify.
Together, these upgrades can raise the reliability of blockchains to Wall Street standards and incentivize blockchain trading. Once a company realizes that it can trade faster through blockchain rails (gaining an advantage over its competitors) without sacrificing reliability, institutions will flood the chain.
The True Cost of Off-Chain Institutional Trading
Keeping most activity off-chain concentrates liquidity in private systems and limits transparency into how prices are formed. This keeps the industry dependent on a handful of trading venues and reduces one of the biggest advantages of cryptocurrencies: the ability for applications to openly connect and build on each other.
The limit is even more obvious with real-world tokenized assets. Without reliable on-chain performance, these assets risk becoming static wrappers that are rarely traded, rather than live instruments in active markets.
The good news is that change is already underway. Robinhood’s decision to launch its own blockchain shows that institutions are not just waiting for cryptocurrencies to catch up, but are taking the lead themselves. Once some companies demonstrate that they can trade faster and more transparently on-chain than off-chain, the rest of the market will follow.
In the long term, cryptocurrencies will not simply be an asset that institutions invest in, but will be the technology they use to move global markets.
