2022 was a whirlwind year for crypto, to say the least.
While the year started off strong, with real technological advancements and excitement about its potential, there were noticeable challenges. Overnight support in the millions to Ukraine, 1 billion donated in COVID relief, and legislative gains in the EU and Asia, were accompanied by headlines around Terra Luna, Celsius, and Three Arrows. At the end of the year, the latestrevelations about FTX and the alleged criminal activity of a small group of people within the company sent massive shockwaves through the entire crypto industry. Given its importance in the space, thecontagion and fallout may not be over.
If there is one message that came across loud and clear, it’s that regulatory clarity is needed – and it’s needed now.
The financial services industry is experiencing an unprecedented AI investment boom that signals a fundamental shift in how institutions operate. According to Allied Market Research, AI in financial services reached $13.7 billion in 2023 and is projected to surge to $123.2 billion by 2032.
1) Problem
Smart contracts have created a brand-new operating model for financial services by enabling their execution on a blockchain without intermediaries.
However, the complexity of smart contracts converts each defect into a structural vulnerability. Exploits have already generated losses measured in billions of dollars and have slowed institutional adoption.
What happens when billions of dollars move at the speed of code? According to the Bank for International Settlements (BIS), the effect on U.S. Treasury markets is material—and not necessarily benign. A $3.5 billion inflow into stablecoins caused 3-month Treasury yields to drop by 2 basis points (BPS); the same volume flowing out led to a 6 BPS increase. This isn't background market noise—it’s a measurable monetary signal, revealing the capacity of code to co-opt traditional policy tools.
This article is adapted from a presentation delivered at the Federal Reserve Bank of New York in April, 2025, where Ethan Chan (CEO, Allium) shared insights on the state of on-chain trading and its implications for consumer protection and market oversight.
Authors: Ethan Chan, William Lai, Carlos Cortes Gomez
As of mid-2025, crypto exchange trading volumes have reached unprecedented levels, spiking above $1.8 trillion in a single month (The Block). Despite millions of new retail traders coming on-chain every month, these participants face two systemic disadvantages: 1) Incomplete market data and 2) Inconsistent trade execution quality.
Cryptocurrency scams cost investors an estimated $9.9 – $10.7 billion globally in 2024, driven largely by AI-generated fraud and pig butchering schemes. Generative AI has industrialized fraud at an unprecedented scale, exploiting crypto’s decentralized nature with deepfake impersonations, phishing exploits, and automated chatbots.
As of September 2025, stablecoins and tokenized deposits have crossed from theory to production. Payments firms are abstracting the crypto bits. Large banks are quietly running deposit-token pilots for treasury and collateral. Card networks are building multi-token rails with bank-grade rulebooks.
From where I sit—talking every week with founders, VCs, bank execs, and regulators—the winners aren’t the ones “doing crypto.” They’re the ones compressing settlement time and counterparty risk in ways their teams can measure by quarter-end. That’s the game.
This piece is an analysis and a playbook. It’s opinionated on purpose.
"Nothing is permanent except change." - Heraclitus
Introduction: The Great Unbundling
There was a time when some of the largest technology companies believed that they had unique ability to tackle the major regulated industry challenges. The industry demanded greater efficiency, risk management and global availability, among the core requirements. Many of those legacy providers built moats that were deep and well fortified. Slowly, change began to take place.
The digital identity and risk decisioning landscape stands at a critical inflection point—a moment where traditional fraud prevention measures have become alarmingly vulnerable to sophisticated attacks. As cybercriminals harness AI and automation to bypass conventional security measures, organizations aren't just falling behind—they're facing an existential threat to their digital trust infrastructure.
The Administration, Congress, and regulators continue to advance efforts to establish legal and regulatory clarity for digital assets in the United States. The recent passage of the Guiding and Establishing National Innovation for US Stablecoins of 2025 Act (GENIUS Act), on 18 July 2025 was a significant milestone and
cleared the way for the more challenging task of addressing digital asset market structure legislation.
TLDR:
Stripe just launched Managed Payments, reviving the Merchant of Record (MOR) model, a structure that has been around for decades but is suddenly critical again. MORs act as the
official seller, handling payments, taxes, fraud, and disputes so you do not have to. Today, the model stretches beyond marketplaces like Amazon and Apple’s App Store into crypto onramps, where players like Coinbase and MoonPay step in as MORs to convert fiat into stablecoins while absorbing fraud and dispute risk. This piece unpacks why MORs are back, who is leading the charge, and why Stripe’s entry signals a broader shift in how global and digital commerce will be structured.
Foundational financial infrastructure is being rearchitected with new modern digital primitives - blockchain technology as a new global transparent ledger and currency backed stablecoins as the medium for value transfer. Stablecoins promise an instantaneous, inexpensive and unrestricted means to transact anytime and anywhere using a currency-backed token. Still, despite growing optimism, stablecoins today remain largely dependent on the same legacy financial rails it claims to disrupt, and the competitive advantages or value propositions vary between geographic regions and transaction types.
Tokenization is no longer a futuristic concept relegated to the fringes of finance. It is rapidly emerging as a transformative force with the potential to reshape how we own, trade, and manage assets. While the initial hype surrounding blockchain1 and cryptocurrencies may have obscured tokenization’s true potential, its underlying principles of fractionalization, automation, and enhanced transparency are poised to unlock unprecedented opportunities for investors, businesses, and the global economy. 2 3
Artificial Intelligence (AI) is not just another emerging technology. It is a new production function, reducing the cost and spread of cognition in the same way electrification reduced the cost and spread utilization of power. For banks, this shift brings both exponential opportunities and existential risks. The winners will be those that embed AI as a core operating model. The losers risk losing relevance in a market increasingly defined by AI-native fintechs and forward-leaning incumbents.
