Wall Street’s appetite for crypto 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 at expanding its digital asset trading infrastructure. Yet, despite all this momentum, almost none of it actually happens on the chain.
Institutions now treat crypto as a legitimate asset class, but not as a place to operate. The majority of trading, settlement and market making still takes 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 deliver predictable speed, reliable data access, and operational resilience on par with Wall Street’s systems, the biggest players will continue to trade off-chain, limiting transparency, liquidity, and the very innovation that made crypto compelling in the first place.
Why order flow remains off-chain
Institutions avoid trading onchain because most blockchains do not meet their standards. Institutions require both speed and reliability, and blockchains tend to struggle with the latter.
Many blockchains become overloaded during peak times, causing transactions to fail unpredictably. Gas charges can change erratically as network activity fluctuates, introducing further chaos. Institutions refuse to operate in such an unpredictable environment.
Institutions must also undoubtedly ensure that trades are settled correctly, even when many things happen at once. Some blockchains, such as Layer 2s or rollups, rely on optimistic settlement techniques that work most of the time, but sometimes require transactions to be rolled back, reversing settled transactions.
Within these constraints, institutions must ensure that they are able to act as quickly as possible. In traditional markets, institutions have paid millions to shorten the length of fiber optic cable between them and Nasdaq, allowing them to settle trades a nanosecond ahead of the competition. Blockchain latency is still in seconds or even minutes, which is not competitive at all.
It is important to note that modern institutions have access to crypto ETFs, enabling them to purchase crypto exposure through traditional markets using the optimized fiber optic cables they are familiar with. This means that to attract onchain institutional trading, a blockchain must surpass the speeds of traditional markets (why would institutions switch to a slower trading venue?).
Upgrading blockchains to institutional standards
Institutions will not simply create a Metamask wallet and start trading Ethereum. They require custom blockchains built to meet the same standards of performance, reliability and accountability as traditional markets.
A key optimization is instruction-level parallelism with deterministic conflict resolution. Simply put, this means that a blockchain can process many transactions at once (like multiple cashiers calling customers in parallel) while guaranteeing that everyone’s receipt comes out correctly and in the right order every time. It prevents “traffic jams” that cause blockchains to slow down when activity increases.
Blockchains designed for institutions should also eliminate I/O bottlenecks and ensure that the system does not waste time waiting for storage or network latency. Institutions must be able to perform many simultaneous operations without creating storage conflicts or network congestion.
To make integration more seamless, blockchains should support VM-agnostic plug-in connectivity, allowing institutions to connect existing trading software without rewriting code or rebuilding entire systems.
Before committing to onchain trading, 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 workloads from payments, DeFi and high-volume trading that institutions can verify.
Together, these upgrades could raise blockchains’ reliability up to Wall Street standards and encourage them to trade onchain. When a company realizes that they can transact faster via blockchain rails (getting a leg up on their competitors) without sacrificing reliability, institutions will flood onchain.
The true cost of off-chain institutional trading
Keeping most activity off-chain concentrates liquidity on private systems and limits transparency in how prices are formed. This keeps the industry dependent on a handful of trading venues and blunts one of crypto’s biggest advantages: the ability of applications to connect and build on each other in the open.
The ceiling is even more apparent with real-world tokenized assets. Without reliable on-chain performance, these assets risk becoming static wrappers that rarely trade, 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 aren’t just waiting for crypto to catch up — they’re taking the initiative themselves. Once a few firms have proven that they can act faster and more transparently on-chain than off, the rest of the market will follow suit.
In the long term, crypto will not just be an asset that institutions invest in, it will be the technology they use to move global markets.
