Why Market Integrity is the Next Great Hurdle for Institutional Crypto

Despite the market volatility in recent weeks, momentum continues to build across the digital assets industry as institutional interest accelerates. From the implementation of Markets in Crypto-Assets Regulation (MiCA) in Europe, to the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act in the US positioning itself as an innovation catalyst, to rising enthusiasm for stablecoins in payments and trade finance, the industry is entering a new stage of maturity, one defined less by uncertainty and more by constructive progress. Yet this forward momentum brings a critical next step into focus: strengthening market structure and market integrity. For institutional capital to deploy at meaningful scale, the conversation must now evolve. The industry has largely solved the problem of access. The real challenge ahead is integrity. That means addressing the structural risks created by crypto’s 24/7 trading cycle and building the surveillance capabilities needed to address the topic of manipulation.

The 24/7 Liquidity Paradox

The ‘always-on’ nature of crypto is a doubleedged sword — it provides constant access, but makes managing risk significantly harder. Traditional finance (TradFi) operates on a distinct rhythm.

Markets Open, Markets Close

This structure consolidates liquidity into specific windows, allowing for efficient price discovery and deep order books.

When the New York or London bells ring, the world knows where the liquidity is.

Crypto offers no such consolidation. It is fragmented across hundreds of venues and operates without pause.

While this offers theoretical efficiency, the reality for an institutional risk committee is far more complex. We are witnessing a profound liquidity mismatch, particularly during the weekend gap.

When the traditional banking rails shut down on Friday evening, liquidity in the digital asset markets often thins out dramatically.

This creates a structural vulnerability. In a thin market, it takes significantly less capital to move the price of an asset.

Consequently, weekends have become a playground for market manipulation, where bad actors can paint the tape or trigger cascades that would be impossible in a liquid, Monday-morning market.

For a retail trader, this volatility is a feature of the game. For a risk manager at a Tier-1 bank or asset manager, it is a non-starter.

They cannot deploy client capital into an environment where price discovery is susceptible to low-volume manipulation simply because it is Saturday.

Surveillance Beyond Compliance

The solution to this integrity gap cannot be purely regulatory. While frameworks like MiCA are setting the stage, and we are seeing positive movements in the UAE with the Virtual Asset Regulatory Authority’s (VARA’s) nimble approach to rulebooks, regulation is often a lagging indicator.

The industry cannot wait for a mandate to address market manipulation.

If we want to merge the worlds of traditional finance and digital assets, the infrastructure providers — custodians, exchanges, and asset managers — must self-impose higher standards.

We need a shift toward proactive, real-time market surveillance. This goes beyond standard Know Your Transaction (KYT) checks or wallet screening. It requires sophisticated monitoring tools that can identify wash trading, spoofing, and layering in real-time.

Currently, too many participants get burnt by manipulation, yet it remains a heavy topic that few want to address publicly.

By integrating institutional-grade surveillance, we are not just ticking a compliance box; we are protecting the asset itself.

The Evolution of Custody

Addressing market integrity also requires us to rethink the plumbing of how assets are held and utilised. The old narrative of the custodian acting solely as a digital vault is dead.

The future lies in utility services that sit on top of custody, such as collateral management products like off-exchange settlement (OES), collateral-as-a-service (CaaS) and delivery versus payment (DVP) settlement layers.

We are seeing a massive evolution in how counterparties interact.

Previously, if a client wanted to trade on an exchange, they faced the binary risk of posting collateral directly to that venue.

Following the market contagions of recent years, that model is no longer sufficient for large institutions.

We are now seeing the rise of triparty agreements involving banks, custodians, and trading venues. In this model, a bank can take digital assets as collateral or loan dollars against them, without ever having to touch the underlying crypto asset or hold it on their balance sheet.

The custodian sits in the middle, managing the collateral and mitigating the counterparty risk. This is not just a theoretical utility; it is a live demand. We are seeing banks, who are not necessarily direct clients of the crypto ecosystem, utilising this infrastructure to facilitate loans and trade finance. This structure removes the bilateral risk that keeps risk committees awake at night. It allows institutions to engage with the volatility and opportunity of the asset class, while the structural integrity of the trade is secured by a regulated third party.

Educating the Market

Achieving market integrity also demands a renewed focus on education. While institutions increasingly understand the need for a custodian and a regulated access pathway, many still lack the framework to evaluate the market structure itself.

It is therefore incumbent upon crypto-native firms to translate technical risks into the language of traditional finance.

This includes offering institutions a clear framework for assessing venue quality, including order-book depth across time zones, the proportion of inorganic volume, transparency of market-making programmes, and the behaviour of liquidity during weekends or banking-rail closures.

When institutions begin interrogating topics such as weekend liquidity depth, triparty segregation for posted collateral, or how exchanges detect spoofing and wash trading across multiple venues, it forces the entire ecosystem to raise its standards.

Education is not simply about explaining infrastructure; it is about equipping risk committees with stress-test scenarios, common definitions of manipulation, and practical guidance on how to evaluate counterparty exposure.

By empowering institutions with this clarity, the industry creates a more informed demand for transparency, and ultimately accelerates the path toward true market integrity.

The road to 2026

As the digital asset industry enters its next phase of maturity, the focus can no longer rest solely on expanding access or refining regulatory frameworks.

The true inflection point lies in building markets that behave with institutional reliability. Technology has evolved, regulation is advancing, and the appetite from global institutions is growing.

What is missing is the structural integrity and real-time oversight that can support meaningful, long-term capital deployment.

The providers who deliver that standard, combining resilient custody, transparent market structure, and surveillance that prevents manipulation before it starts, will set the benchmark for the entire ecosystem.

Exchanges typically hold assets on behalf of clients, but growing concerns over security and operational risk prompted a shift towards off-exchange collateralisation, offering enhanced risk mitigation while preserving capital efficiency. 

Komainu is at the forefront of this evolution, bridging the gap between traditional financial infrastructure and the digital asset ecosystem. By adopting best practices from established financial markets, Komainu has developed collateral management solutions that allow institutions to unlock asset utility without compromising security.