U.S. President Joe Biden’s recent executive order on digital assets and blockchain was a meaningful step forward, but the markets need tangible further development for financial institutions to commit more to the space. 

That was the consensus of an exchange leader panel Wednesday morning at FIA Boca. 

Exchange operators that facilitate the trading of traditional securities such as stocks, options, and derivatives face an existential conundrum of whether to cooperate or compete with crypto. Exchanges need to recognize and adapt to the increasing influence of bitcoin and other cryptocurrencies, while at the same time pushing back on the underlying notion of crypto, which is a decentralized financial system with no need for intermediaries, or rule-making bodies.

FIA CEO and panel moderator Walt Lukken kicked off the exchange leaders discussion by noting that crypto is interesting as a new asset class, but moreso for its implications on market technology and structure. Crypto market developers have the advantage of starting with “a blank piece of paper,” Lukken said.   

Tal Cohen, Executive Vice President and Head of North American Markets, Nasdaq, said crypto has captured the imagination of retail investors, and has challenged the norms of market structure. On the flip side, it raises questions for how regulated entities such as exchanges can get into the business, given lingering concerns around brokerage, custody, KYC and anti-fraud provisions. 

“At the end of the day, markets need to embrace new technology while sustaining investor protection,” Cohen said. Regulatory agencies “need to act on Biden’s executive order and provide more clarity.”

Lynn Martin, President of NYSE Group & Chair of ICE Fixed Income & Data Services, noted that digital assets have been on ICE’s radar for years. The exchange operator made a small investment in Coinbase in 2015 as part of a $75 million funding, which it sold last year for $1.2 billion.

Martin said crypto needs two pillars to take the next leg up. “There need clear regulatory frameworks that are tested and well understood, and additional transparency,” she said. “Until then I don’t widespread adoption by institutions.”

Loh Boon Chye, CEO of SGX Group, sees the potential for exchanges to collaborate with crypto firms. “There is a whole sphere of services including custody and finance,” Loh said. “Exchanges are good at aggregating liquidity. There is potential away from trading in crypto services.”

David Schwimmer, CEO of London Stock Exchange Group, said his firm is proving crypto data, and he is seeing progress in terms of broader adoption of digital assets. 

But crypto has reached a “fork in the road,” Schwimmer said, where the next step is either to align itself closer with global frameworks, standards and transparency, or double down on its roots as a private vehicle of decentralized finance.