Regulation is often seen as the key that will unlock institutional adoption, but as Sean Lawrence argues, “adoption isn’t a function of regulation.” The world’s largest stablecoin, Tether, continues to see widespread adoption despite long-standing concerns about transparency, including a $41 million fine in 2021 (CFTC).
If adoption were driven purely by regulation, Tether’s dominance would be difficult to explain. So what actually gives institutions the confidence to enter digital markets?
Sean Lawrence began his professional career as a Collateral Management Specialist at J.P. Morgan and has spent nearly 2 decades working across major global banks, including UBS, NatWest, and Deutsche Bank. After a lengthy stint in institutional markets, Lawrence made the unique transition into digital assets, driven not by ideology but by “curiosity of the underlying technology.”
Today, Lawrence is Head of Europe at LTP, a digital assets prime broker, he works directly with major institutions.
Working in banking is often seen as an end goal for many, but for Lawrence, it became the foundation that allowed him to move into digital assets. Despite holding senior roles at some of the world’s leading institutions, he admits he eventually found the work to be “boring” and felt he was a “technologist at heart.” While crypto can be framed as a financial instrument, in Lawrence’s eyes, it was seen as “an interesting database with many use cases beyond” the transfer of wealth.
The emergence of crypto brokerage services has been one of the drivers for institutional participation in digital assets, which boosts liquidity and mainstream legitimacy. However, Lawrence believes the way these services operate has introduced serious transparency risks that many institutions underestimate. He underlines a clear distinction between dealer brokers and prime brokers.
Dealer brokers trade directly against their clients, acting as the counterparty. Whereas, prime brokers do principal risk and align with their clients’ interests. Although both services exist in TradFi, Lawrence argues that the distinction is far less clear in crypto.
This lack of clarity can create hidden risks. Custodians, for example, are designed to hold private keys to protect an individual’s assets, yet do execution, which contradicts their purpose and puts clients' funds at risk. As Lawrence puts it, “these archetypes matter.”
In the last decade, institutional participation in digital assets has grown massively, yet many firms remain cautious. According to Lawrence, one of the biggest structural issues holding institutions back has nothing to do with regulation but with how liquidity is created in markets. Many exchanges pay rebates to incentivise trade and boost volume, but in reality, Lawrence argues this “distorts price discovery” rather than strengthening it.
When traders are being paid to trade, volume becomes artificial rather than natural, creating fake liquidity that doesn’t reflect real demand. He feels this encourages practices like wash trading, where traders buy and sell to themselves to boost volume, and spoofing, where fake orders occur to manipulate demand. These practices undermine market integrity and make it difficult for institutions to assess genuine risk. For firms that rely on transparency and reliable liquidity, these price distortions are a major obstacle.
Regulation is often presented as an immediate solution to crypto’s transparency problem, yet, as Lawrence mentions, regulation can also kill the market. Japan’s 100% Yen cash backing requirement in 2023 is a clear example. Rather than encouraging adoption, it effectively killed the domestic stablecoin market. The UK’s stablecoin holding caps had a similar effect, restricting growth rather than supporting it.
In June 2025, BlackRock’s iShares Bitcoin Trust became the most successful ETF in history, despite being based on an unregulated underlying asset. For Lawrence, this highlighted regulation doesn’t alone create trust. What matters more is “belief in enforceability,” confidence that the rules can actually be upheld if something does go wrong.
Prime brokers offer a range of services to encourage institutional participation, yet risk analysis might be the most important. Institutions are less focused on regulation and more focused on understanding liquidity and potential losses. Although crypto data is fragmented and so is liquidity, they give firms much more tangible value compared to regulation, according to Lawrence. Regulation may encourage institutional participation, but now all “modern markets are driven by data, more than regulation.”
Volatility is a huge stumbling block for crypto institutional participation, especially when firms “care about profit, not ideology”. High levels of volatility can result in sudden market downturns and huge liquidity crises, leading to career-ending consequences, according to Lawrence.
Beyond volatility, governance and counterparty risk remain a growing fear for institutions. Investors require transparent and robust security measures to ensure legal compliance and protect investor confidence. The FTX collapse in 2022 was a clear example of where the exchange failed to manage client assets properly. This caused huge losses for users who couldn’t withdraw funds and $8 billion loss in FTX accounts (KPMG). For many institutions, it was a reminder that trust in counterparties is equally as important as trust in technology.
In theory, regulation should increase adoption. In reality, the evidence suggests otherwise. Markets have repeatedly shown us that trust and data move more than regulation. Increased regulation may provide additional security, but it will not be the reason firms move towards digital assets, as Lawrence claims, “adoption isn’t a function of regulation”.
For institutions, confidence comes from enforceability, transparency, and data to allow them to manage risk and protect capital. Until those foundations are in place, regulation will never be enough on its own to bring institutions fully into digital assets.
