What’s Driving Institutional Adoption of Digital Assets?

Building institutional confidence through risk and compliance tooling

Large financial institutions typically operate with well-established processes that require robust frameworks for risk and compliance. Many institutional clients demand the same, if not more, robust risk and compliance tools in digital assets, akin to what they know in traditional markets. Specifically, we have seen institutions look for sophisticated portfolio and risk engine tools to manage their digital asset portfolios alongside their traditional strategies or asset classes.

At Talos, we’ve responded by expanding our platform to include a portfolio management risk solution that supports asset managers in their investment process. Institutional clients trade with and leverage a spectrum of counterparties; this can include centralized and decentralized exchanges, OTC liquidity providers, as well as custody solution providers. Having a single, real-time view of their positions and complete risk exposure empowers institutions to efficiently manage their complex digital asset operations end to end.

Asset managers, in particular, prioritize portfolio compliance enforcement and monitoring, which is a fundamental requirement of any institutional-grade portfolio management system. From both an investment and regulatory perspective, the enforcement component prevents orders from violating compliance rules, while the monitoring component alerts portfolio managers and compliance officers to threshold breaches caused by exposure drift.

Key drivers behind institutional momentum

Momentum for institutional adoption will continue to be driven by a few key factors.

First, the emergence of trusted operators within the digital asset space: they will act as a bridge, simplifying access for institutions who are in the discovery phase. As market leaders, they have shown a track record and have a deep understanding of how to operate securely and effectively in the digital assets markets. They will support the next wave of investor demand for access. 

Second, operational tools: as the tooling matures to institutional standards, large asset managers and funds are increasingly comfortable deploying client-facing offerings at scale.

Lastly, the emergence of proven operating models: once an investment committee makes a decision to go “0 to 1” and launch a digital assets strategy, whether it be client-facing crypto products, services or investment funds, the critical next step is determining the operating model. In digital assets, this presents many unique challenges, as the technology, markets and regulatory requirements are changing at a rapid pace. Institutions must evaluate whether the model will perform at an institutional scale end to end, and they need to assess, both from a trading and operational perspective, their current technology stack against how quickly they want to enter the market. Repurposing an existing traditional asset system is likely an inefficient path. 

At Talos, we’ve advised numerous institutions across both the buyside and sellside to enter the digital assets market. Crucially, we have helped implement a wide range of operating models, and as a result, are well positioned to guide an institution through the complexities of establishing the right model for them.  

Integrating crypto into legacy workflows

When integrating crypto infrastructure with legacy systems, institutions should first identify what is their strategic edge. For example, asset managers and hedge funds dedicate a considerable amount of resources to optimizing and maximizing their alpha through best-in-class research teams, models and investment strategies. 

Talos has partnered with many of the world’s largest financial institutions, and we have seen institutions rapidly ramp their integration and deploy their investment strategies when they are provided with agile, performant and safe access to the market. In our experience, institutions need solutions that are modular and flexible, so that they can seamlessly integrate their digital asset infrastructure with their existing workflows. 

Ultimately, institutions should prioritize infrastructure that’s built for scale and a toolkit that is built for purpose to optimize key trading requirements such as latency, hedging, leg risk, and market impact. For many of the largest financial institutions, it is about building a system where they can operate with the same confidence they have in traditional markets. 

For more insights from Tim, read about his interview on Nasdaq TradeTalks, or watch his panel at Consensus Toronto 2025.  

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