Making Bitcoin Bankable for Institutional Investors, Asset Managers, and Banks

Can we observe an institutionalization of crypto assets such as Bitcoin and Ethereum?

There are different segments of investors that have invested in crypto assets or seek to do so. Figure 1 presents different types of investors and our observations on how they currently invest.

Type 1: retail investors

Bitcoin, Ethereum, and other crypto assets (e.g. Basic Attention Tokens) have been interesting for retail investors for quite some time. The typical retail investor is between 18 and 40 years old, male, and tech-savvy. According to estimates, there are about 800,000 such retail investors in Germany, who mainly own Bitcoin. These retail investors register directly with the crypto exchanges (see type 1 in Figure 1). The Stuttgart stock exchange with its retail business “Bison”, for example, has taken 60,000 retail investors on board in the last 8–9 months. Most crypto exchanges are usually based in the USA or Asia.

Figure 1: different types of investors

Type 2: institutional investors using an order routing system directly

For institutional investors, “traditional” crypto exchanges often do not offer the right package. There are considerable spreads between bid and ask prices; “market” prices vary between exchanges, and KYC is difficult for corporations — just to name a few reasons.

Type 3: institutional investors relying on brokers

As indicated by Figure 1, there is also the possibility that institutional investors rely on a broker to buy, sell, and securely hold the crypto assets. In this case, the broker himself has registered once with several trading venues and custodians, allowing institutional investors to avoid this time-consuming task. The broker has a so-called Broker-Dealer License, which he has applied for at the local financial market authority and which allows him to buy and sell assets as a third party on behalf of the institutional investor.

Type 4: institutional investors requiring bankable assets

Due to regulatory requirements and accounting, larger asset managers (e.g. banks, insurances) can only invest in Bitcoin, Ethereum, and other crypto assets if these assets have been “packaged” into bankable assets. Stocks and bonds are bankable assets, as they fulfill all regulatory requirements. For example, bankable assets have been assigned an International Securities Identification Number (ISIN) to identify the asset through ordering terminals, accounting procedures, etc.


Some years ago, mainly retail investors invested in crypto assets. Now, as the interest from family offices and other asset managers in Bitcoin, Ethereum, etc. increases, the regulatory requirements, risk management, and traditional investment processes need to be met in order to comply with the demands of institutional investors. Depending on the type of institutional investor, different solutions are available. Typically, an order routing system is required to execute larger scale orders without affecting prices due to low market liquidity. These systems become even more powerful if they are connected to institutional-grade crypto custodians that provide reliable storage and security services for the purchased assets. A broker-dealer license might ease the investment process. Ultimately, Bitcoins and other crypto assets can be turned into bankable assets. As outlined above, this requires an SPV structure which induces costs but allows larger asset manager to also invest they require assets to be “bankable”.


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Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail ( via LinkedIn or follow him on Twitter (@philippsandner).



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Philipp Sandner

Philipp Sandner


Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center