Wall Street firms can embrace blockchain technology, just not in its current form. The open, distributed ledger for all to see goes against the way traditional finance works, says Don Wilson, the founder and CEO of DRW, a TradFi trading firm that has been in crypto for more than a decade.
“There’s no world where institutions are going to say, ‘Oh yeah, just publish all my trades onchain,’” Wilson said Thursday at the Digital Asset Summit in New York. “Any money manager would consider it a failure of fiduciary duty to publish to the world every transaction he makes.”
The fact that every trade is visible is at odds with how institutions manage risk and protect trading strategies, Wilson said. If an investor with a large stake in a company starts selling its shares, other market participants will be able to detect the pattern and the initial trades will have a “huge price impact” on the investor’s subsequent trades. In other words: transparency works to the trader’s disadvantage.
“The problem is not the technology itself, but how it is implemented,” Wilson said. “I think it’s a mistake to put things on these chains that have full transparency.”
DRW was founded in 1992 and in 2014 introduced Cumberland, one of the first institutional crypto trading desks, just like bitcoin BTC$68,988.27 markets began to take shape. That early entry gave the company a front-row seat to how digital assets evolved from niche markets to infrastructure that banks are now studying.
Wilson’s current focus reflects that shift. He pointed to efforts to bring traditional assets on-chain, and cautioned against doing so on fully transparent networks.
Ethereum has long been promoted as the blockchain most likely to join Wall Street, with developers highlighting its large decentralized finance (DeFi) ecosystem and its role in early tokenization efforts.
But just like Bitcoin, all transactions are visible and major banks have taken a different path. Many have spent years building or supporting private, permissioned networks, arguing that financial institutions need tighter controls over data, access and compliance. Companies like JPMorgan, the largest U.S. bank by assets, have developed internal systems, while others have supported platforms designed to limit who can see and validate transactions.
Wilson advocated systems that limit visibility. “Privacy is about at the top of the list,” he said, describing the features needed for institutional adoption. He also mentioned problems with market structure, such as front-running. “That ability for people to reorder transactions … that’s just not suitable for financial markets.”
His comments come as tokenization is gaining popularity across the industry. Banks and asset managers are testing ways to move stocks, bonds and other assets to blockchain-based systems. Wilson agrees that the opportunities are great, especially for the major asset classes. But he expects the design to look different from current public chains.
“I think it’s clear that that’s not going to happen,” he said, referring to the idea that institutions will adopt fully transparent systems. “Everyone thinks I’m crazy… so I don’t know. Maybe I’m wrong. We’ll see.”