The Great Convergence: How TradFi and Crypto Infrastructure Are Melding and How to Benefit

Key Takeways

• Traditional finance and crypto are converging in practice: ETFs, stablecoins, tokenized treasuries, and onchain equities are already live, and the trend is accelerating.
• The assets crossing first share three traits: enormous scale, deep liquidity, and regulatory clarity. Incremental efficiency gains only compound when the underlying pool is massive.
• Capital efficiency and access drive adoption more than technology. Onchain composability unlocks leverage and yield most investors cannot reach through traditional markets.
• Licensing separates the durable winners. Firms that own the custody, transfer, and settlement rails are positioned to carry them into whatever moves onchain next. The SpaceX IPO showed where the plumbing strains when those rails are missing.

Where TradFi and Crypto Have Already Met

Increasingly, onchain and traditional finance have started to converge. We have seen digital assets find ETF wrappers on public exchanges, bringing them into ordinary brokerage accounts, and we have seen traditional assets move onto blockchain rails, bringing global access to regulated products. Hundreds of billions of dollars are now held in stablecoins, namely USDT and USDC. Treasuries are becoming onchain collateral, as with BlackRock’s BUIDL. And equities are increasingly showing up onchain in two different forms: tokenized shares that represent a claim on the real stock, like those on Backpack, and perpetual futures that offer synthetic price exposure with no underlying ownership at all, like those on Hyperliquid. The trend will keep building from here. With the lines between TradFi and crypto blurring, what positions a firm to benefit most from the ‘great convergence’?

What Do These Convergence Points Actually Have in Common?

First, one should ask what these convergence points have in common. The assets that come to market first tend to have enormous scale, deep liquidity, and clear regulation. From dollars to treasuries to equities, the benefits of crossing the TradFi-crypto chasm are most pronounced where demand is already greatest. For bitcoin, an ETF wrapper allowed public market capital to buy (and hedge and short) the asset. For stablecoins, blockchain rails enabled broader, more seamless distribution of the dollar. The truth is that in most cases, the benefit of moving an asset across these two infrastructure stacks is incremental, not exponential. Products need to be largely fungible, commodity-like assets without much bespoke configuration, or the advantages of scale erode quickly. The gain might be a lift in distribution of perhaps a quarter, or a few dollars shaved off the administrative cost of a transfer. That kind of change only matters when the base value of the asset pool is enormous. Adoption can still compound quickly, since the pools moving onchain are large and growing, but it compounds because the pools are huge, not because the per-unit improvement is dramatic.

What Drives Adoption When the Technology Is Table Stakes?

Next, one wonders what actually drives adoption. Capital efficiency and access tend to do the work. Take tokenized treasuries. Direct access to BUIDL is restricted, since the token only moves between whitelisted, KYC’d wallets, but a whitelisted intermediary can hold it and issue a permissionless wrapper token against it, and that wrapper is what circulates in the open market. Through that representation, global participants can capture treasury yields while running “looping” strategies with high leverage that further amplify returns. The composability of onchain products offers returns (and risks) that are hard for ordinary investors to find in traditional markets. A publicly traded real estate company or a primary dealer transacting with the Fed can run enormous leverage against stable base assets like real estate or treasuries; most people have no way to reach that kind of capital except onchain. The point is not that BUIDL itself trades freely. It is that the security can stay gated while a representation of it does the traveling. This is a win for issuers, who drive more demand, and for global investors, who reach yield and leverage that were previously out of range.

Where Do the Limits Show Up?

This is also where the limits show up. Many of these products push against the edges of regulatory clarity. The working position of many issuers today is that as long as primary issuance abides by AML/KYC rules, the secondary market can trade freely. It is hard to see how that holds for every asset. For stablecoins it may well survive, since dollars already circulate as cash without diligence on every hand-to-hand transfer. For securities, it is shakier because the issuer has historically borne obligations extending into secondary trading, and the idea that a registered stock trades openly and permissionlessly on something like Uniswap seems unlikely to last. BUIDL is the template for where this probably lands: trading mediated through UniswapX to whitelisted addresses only, a walled garden rather than open transfer.

The SpaceX IPO: A Case Study in What the Technology Cannot Solve

The SpaceX IPO this June made the same point in a louder way. SpaceX priced on June 11 and opened on Nasdaq the next day. In the run-up, several crypto platforms, including Binance, Bybit, Bitget, and MEXC, marketed tokenized “early access” to the offering through xStocks, then canceled on listing day and refunded something like $557 million, because xStocks could not source enough actual shares. The bottleneck was not the technology. It was the same allocation pipeline that decides who gets IPO stock at Fidelity or Schwab. And the instruments trading under that one SpaceX ticker were not the same instrument at all: real Nasdaq shares through a broker, redeemable custody-backed tokens from Backpack, tracker certificates on xStocks that carried no shareholder rights, and cash-settled perpetual futures on Hyperliquid. Everyone could get exposure to the name. Not everyone ended up owning the same thing. Tokenization was the easy part. The regulated plumbing underneath it, the allocation, the custody, and the settlement, was where the whole thing strained.

Who Wins the Convergence?

Taken together, the products that win are those with real scale, that stand to gain from capital efficiency and better distribution, and that operate within the rules rather than around them. Technology moves fast; regulation does not. Firms that try to route around the rules will hit a wall the moment they reach for institutional capital, which is where the real money sits. The durable position is a clear, defensible path for technical improvement that does not put existing business lines at risk.

How Will Regulation Have to Change?

That is why licensing, not novelty, tends to separate the winners. Securitize is the obvious example. On the back of early success tokenizing securities, it collected the licenses it needed, as a broker-dealer, an ATS, and a transfer agent, which let it mint, sell, move, and market these assets inside the regulatory perimeter. The incumbents are moving too. ICE, the owner of the NYSE, recently acquired the Digital Asset Custody Company, standing up institutional-grade custody for digital assets. Though originally a bitcoin play, it extends to tokenized securities. The logic generalizes: whoever owns the custody, transfer, and settlement rails is positioned to carry them into whatever moves onchain next. Owning the choke points of the old system is the cleanest way to own them in the new one.

The Durable Position

The onchain world keeps pushing on distribution, and AML/KYC sits as the main check on how far it can go. SpaceX stock can be placed onchain easily enough, but the ability to track and trace who holds it will stay non-negotiable. A government like the United States, which benefits enormously from a securities market people trust precisely because the rules get enforced, is not going to trade that trust for the sake of modernization. At the same time, the current approach carries real costs. It throttles global distribution, it concentrates sensitive data into honeypots that become a liability in their own right, and it imposes friction that may be out of proportion to how much illicit activity it actually prevents. As assets converge, that tension is likely to push regulators to modernize how they protect markets, not just whether they permit new rails.

In the end, TradFi and crypto have truly started to meet, and each is reshaping the other at a quickening pace. The opening is not for the firms that move fastest or tokenize the most exotic thing. It is for the ones that stay licensed and compliant while bringing crypto-enabled products to market, and that concentrate on the largest asset types, where global demand gives regulation and technology the most room to meet on terms that serve both sides. It’s worth noting that, with many crypto companies in distressed scenarios, the opportunity for beneficial M&A activity with licensed entities offers many entry points at present. The convergence will reward whoever can hold innovation and compliance in the same hand, and, increasingly, whoever already owns the rails that everyone else has to rent.

About the Author

Article authored by Alexander S. Blume, CEO, Two Prime