Written by: Max.S

In November 2025, the global financial landscape experienced a subtle yet profound shift. The Singapore Exchange (SGX) announced the launch of perpetual futures for Bitcoin and Ethereum on November 24. Almost simultaneously, Cboe Global Markets across the ocean announced that its "Continuous Futures"—a product functionally equivalent to perpetual contracts—would go live on December 15.

This was not an isolated product launch but a strategic collaboration spanning two continents. Traditional finance (TradFi) giants are no longer satisfied with the more "traditional" dated futures dominated by the Chicago Mercantile Exchange (CME) since 2017. Their target has been locked in—namely, the profit core of crypto-native exchanges (CEXs, such as Binance and Bybit): a massive market with an average daily trading volume exceeding $187 billion.

TradFi's entry strategy is extremely astute. They are not simply replicating but "reshaping" products to fit regulatory frameworks. Under the strict guidelines of the Monetary Authority of Singapore (MAS), SGX has explicitly limited its products to institutions and accredited investors, successfully "compliant."

Cboe's "Continuous Futures" is a more sophisticated regulatory engineering feat. By setting an ultra-long expiration date of 10 years and supplementing it with daily cash adjustments, it functionally replicates perpetual contracts (without the need for rolling) while legally avoiding the term "perpetual," which has been "tainted" by offshore markets. This approach provides a stepping stone for the U.S. Commodity Futures Trading Commission (CFTC) to approve a functionally identical but nominally "clean" product. This is typical TradFi wisdom: not to circumvent regulation but to reshape the discourse for regulation.

SGX President Michael Syn's remarks hit the nail on the head: "Incorporating perpetual contracts into a regulated framework with exchange clearing… we provide institutions with the trust and scalability they have been waiting for."

At the core of this battle is TradFi's attempt to use "trust" and "regulatory certainty" as weapons to seize institutional liquidity from CEXs.

The Hunt by TradFi Giants: Using "Trust" as a Weapon

The core pain point for institutions: FTX's "Post-Traumatic Stress Disorder" (PTSD)

The collapse of FTX three years ago marked a turning point in the institutional crypto narrative. It exposed the fundamental flaws of the crypto-native exchange (CEX) model: asset opacity, conflicts of interest, and catastrophic counterparty risk.

For a pension fund or large asset management company, the biggest risk is not Bitcoin price volatility (Market Risk) but the misuse of client funds or the risk of exchanges absconding with funds (Counterparty Risk). Institutional investors feel "deeply uneasy" about the "high counterparty risk" posed by "opaque, offshore, unregulated crypto exchanges."

The "original sin" of CEXs lies in their dual roles as market makers, brokers, custodians, and clearinghouses. This is a structural conflict of interest that is strictly prohibited in traditional finance (such as under the Dodd-Frank Act). The risk control and compliance departments of institutions cannot answer a core question: "Who is my counterparty? Where is my collateral?" In a CEX, the answer is "the exchange itself." After the FTX incident, this answer is equivalent to "unacceptable."

TradFi's "Silver Bullet": Central Counterparty Clearing (CCP)

TradFi's solution is structural. When institutions trade on CME or SGX, they are not trading "with each other" but "with the clearinghouse." CME Clear, LCH Digital Asset Clear in London, and Cboe Clear U.S. act as central counterparties (CCPs).

These CCPs intervene in every transaction through "novation," becoming "the buyer for every seller and the seller for every buyer." This means that even if a counterparty defaults, the CCP will use its vast margin pool and default waterfall fund to ensure the performance of the trade. This "eliminates all counterparty, settlement, operational, default, and legal risks."

CME and LCH are not selling "Bitcoin futures"; they are selling "Bitcoin risk exposure cleared by a CCP." The "asset protection fund" provided by CEXs (such as Binance's SAFU Fund) is a form of "corporate guarantee," whose credibility depends on the willingness and financial strength of the CEX. In contrast, TradFi's CCP is a "legal structure," whose credibility is backed by regulation, law, and a vast, transparent financial firewall. The legal and compliance departments of institutions have no choice but to opt for the latter.

Different Paths of the Three Giants

CME (U.S.): The victory of "compliance branding" and the "locking in of ETFs" CME has become a "fortress" for institutional crypto derivatives by 2025. Its average daily trading volume (ADV) for crypto products reached $14.1 billion in the third quarter of 2025, with open interest (OI) hitting a record $31.3 billion. A more critical metric is the "large open interest holders" (LOIHs)—a synonym for institutions—reaching a record 1,014 in September 2025, far exceeding 2024's figures.

As early as 2023, CME had surpassed Binance in Bitcoin futures OI. This marked the beginning of institutional ("smart money") liquidity flowing back from offshore CEXs to regulated TradFi.

CME's victory is not just about compliance. It has "structurally welded" its benchmark rate (CME CF Bitcoin Reference Rate, BRR) with the U.S. spot Bitcoin ETF approved in 2024.

Analysis indicates that most U.S. spot ETFs use CME's BRRNY (New York variant) to calculate their net asset value (NAV). Meanwhile, CME's futures contracts are settled based on BRR (London variant). This creates what is known as "price singularity."

Authorized participants (APs) of ETFs—such as large investment banks—need to hedge their Bitcoin exposure when managing ETF subscriptions and redemptions. They must use CME's futures because only CME's futures are perfectly linked to the ETF's NAV benchmark, thus eliminating "tracking error." CME has therefore locked in hedging liquidity from the trillion-dollar U.S. ETF market. The perpetual contracts of Binance or Bybit, no matter how liquid, cannot provide this zero-basis-risk hedge for ETF APs.

SGX (Asia): Competing for "onshoring" the Asian trillion-dollar liquidity Asia is the "epicenter of this growth" for perpetual contracts. However, as SGX points out, this daily average flow of up to $187 billion "is still primarily priced and settled on offshore platforms outside of Asia."

SGX's strategy is very clear: leverage Singapore's AAA rating and MAS's clear regulations to provide a "trusted" trading venue for family offices, hedge funds, and institutions in Asia. Its goal is not to attract retail investors from Binance but to draw in institutional funds that wish to trade cryptocurrencies but are prohibited from using offshore CEXs.

Eurex (Europe): The innovator catching up Cboe's "Continuous Futures" and Eurex under the Deutsche Börse Group (through LSEG) with its FTSE index futures indicate that TradFi's strategy is blooming in multiple areas. Cboe's 23x5 trading hours, while not as extensive as CEX's 24/7, offer a regulated, centrally cleared perpetual exposure, which is a significant advancement in itself. Eurex, on the other hand, lowers the capital threshold for institutional participation through "nano" and "reduced-value" contracts.

Formation of the "Compliance Premium"

TradFi's liquidity is currently far less than that of CEXs, but institutions are willing to pay a premium for safety. Research shows that CME's Bitcoin futures basis "continues to maintain a 4% annualized premium over Deribit (a crypto-native exchange)."

This 4% premium represents the market price of the "compliance premium" and "counterparty risk aversion." It indicates that the market is quantifying regulatory risk. Institutions are willing to forgo 4% of annual returns in exchange for trading on CME, thereby avoiding custody risk and accessing through their existing prime brokers. The prices of TradFi and CEX will never fully converge. They serve two different risk appetites.

CEX's Defensive Battle: The Difficult Turn from "Offshore" to "Compliance"

CEX's dominance remains absolute. In 2024, the trading volume of perpetual contracts from just the top ten CEXs reached a staggering $58.5 trillion. Binance is the center of this universe, maintaining a market share between 35% and 43%, with monthly trading volumes often reaching trillions.

The breadth of products is CEX's "killer feature." TradFi currently only dares to touch BTC and ETH. In contrast, CEXs (such as Binance, Bybit, OKX) offer a "supermarket" with hundreds of altcoin perpetual contracts. If a hedge fund wants to go long on SOL and short on AVAX, CME is powerless, but Binance can accommodate that. CEXs can launch futures for a new hot token within weeks, while TradFi requires months of regulatory approval.

Achilles' Heel: The "Tightening Spell" of Global Regulation

CEXs are built on the quicksand of "regulatory arbitrage." Now, this quicksand is disappearing. Binance paid $4.3 billion in fines in 2023 and admitted to money laundering, leading to the resignation of its CEO. Bybit has been banned from operating in several countries, including the U.S. and the U.K. OKX faces scrutiny for providing services to U.S. customers from 2018 to 2024.

CEXs are no longer facing the question of "whether to be regulated," but rather "how to be regulated" for survival. A 2025 report criticized the governance of CEXs for having "accountability voids" and using "techwashing" to obscure risks. This model of rampant growth has come to an end.

CEX's Response Strategies: Differentiation, Imitation, Isolation

In the face of TradFi's invasion and tightening global regulations, CEXs are adopting multiple strategies to respond.

First is "seeking legalization." CEXs are desperately "collecting" licenses globally. OKX prides itself on its "extensive license portfolio" in Singapore, Dubai, and Europe. Kraken attracts institutions with its compliance reputation in Europe and the U.S. This is their only way to attract institutional funds.

Second is "imitating TradFi." CEXs are frantically replicating TradFi's infrastructure. The most typical examples are Coinbase Prime and Binance Institutional. They attempt to mimic the "Prime Brokerage" model, packaging trade execution, custody, financing, and reporting into a "one-stop" service to address institutional counterparty risk and operational challenges within their walled gardens.

Finally, there is "isolation and differentiation." The future of CEXs will inevitably be "dual-personality." They must split their business into two:

"Compliance Persona" (such as Coinbase, Kraken, Binance.US): This entity will strictly adhere to KYC/AML, offer few products, have low leverage, and specifically serve institutions and ETFs in the U.S. and Europe. It will increasingly resemble CME.
"Offshore Persona" (such as Binance.com, Bybit): This entity will continue to operate in "friendly" regions like Dubai and Seychelles, offering hundreds of altcoins, high leverage, and financial innovations. It will serve global retail and crypto-native funds.
The invasion of TradFi forces CEXs to undergo this painful but necessary split. CEXs that cannot complete the transformation will be pushed out of the market.

The Rise of DEX: Solving Trust with "Code"

The core narrative of DEXs: ultimate security through non-custodial solutions. Decentralized exchanges (DEXs) propose a more radical solution than TradFi. TradFi says, "Trust our clearinghouse (CCP)." DEXs say, "You don't need to trust anyone."

On DEXs, trades are executed on-chain through smart contracts, and user funds always remain in their own wallets. This fundamentally eliminates the custody risks and counterparty risks associated with CEXs (like FTX). For crypto-native funds, this is the gold standard for risk avoidance. The DEX derivatives market is exploding, with trading volume expected to double from $15 trillion in 2024 to $34.8 trillion in 2025.

The "Glass Ceiling" of DEX: Liquidity and Regulatory Fog

The trading volume of DEXs is only a fraction of that of CEXs. Some commentators sharply point out that a professional trader wanting to trade $100 million in futures "needs CME, Binance, or OKX—no DEX can handle this scale without incurring significant slippage." Liquidity is the first "hard flaw" of DEXs.

The regulatory black hole is the real "hard flaw" of DEXs. The "permissionless" and "anonymity" of DEXs are their core values but also a nightmare for institutional compliance.

DEXs face a "compliance paradox": they must choose between "decentralization" and "institutional adoption," and they can hardly achieve both. How can a compliant fund (like Fidelity) use dYdX? It cannot perform KYC/AML on a DEX. How can it prove to the SEC (U.S. Securities and Exchange Commission) that its counterparty is not a sanctioned entity?

Until DEXs can solve the issues of "on-chain identity" and compliance reporting, they will be excluded from the portfolios of large, regulated institutions (like pension funds and sovereign wealth funds). This forces these institutions to choose CME, SGX, and Cboe.

Endgame Simulation: Liquidity Fragmentation and Market Reconstruction

The Solidification of a "Two-Track Market"

TradFi's invasion will not "kill" CEXs, nor will DEXs "kill" CEXs. Instead, the market is splitting into two (or even three) parallel ecosystems.

Track One: "Regulated Institutional Market"

Players: CME, SGX, Cboe, LCH.
Products: Cash-settled (USD-settled) BTC/ETH futures.
Clients: ETF issuers, large asset management firms, banks, hedge funds.
Characteristics: High compliance, CCP clearing, high "compliance premium," slow innovation. This is the market for "risk management."

Track Two: "Offshore Crypto-Native Market"

Players: CEXs like Binance, Bybit, OKX; DEXs like dYdX.
Products: Perpetual contracts settled in stablecoins/coin-based, covering hundreds of altcoins.
Clients: Retail traders, crypto-native funds, high-frequency trading firms.
Characteristics: High risk, high leverage, rapid product innovation, regulatory uncertainty. This is the market for "speculation and Alpha."
The direct consequence of this "dual-track system" is liquidity fragmentation. In TradFi, liquidity is highly concentrated (like the NYSE). But in the crypto market, liquidity is now fragmented across CEXs (Binance), DEXs (dYdX), TradFi (CME, SGX), and various L2s (Arbitrum, Base).

This presents an operational nightmare for institutions: "Each exchange requires separate risk management… legal teams must negotiate dozens of separate agreements… finance teams must manage collateral across multiple venues… this greatly consumes capital efficiency." Liquidity is abundant, but it is difficult to access efficiently.

Who is the Ultimate Winner? "Crypto Prime Brokerage"

Since liquidity fragmentation is inevitable, the "middleware" that aggregates these fragments becomes the market's "Holy Grail."

The dilemma for institutions is that they do not want to open accounts in ten places; they want to open one account but trade with liquidity from all ten places. This is precisely the role of "Prime Brokerage" (PB) in TradFi.

A crypto PB (like Talos, Fireblocks) will provide a "unified margin account." Institutions will custody assets with the PB, which connects to all liquidity venues like CME, SGX, Binance, dYdX using its technology and legal framework. Institutions can hedge on the regulated CME through one PB interface while trading altcoins on Binance.

The invasion of SGX and CME objectively creates explosive demand for crypto PBs. The future winners may not be the exchanges at all, but those PB platforms that can "glue" this fragmented market together for institutions.

Weaponization of Regulation: The Geopolitical Liquidity War

Regulation is no longer just "rules"; it has become a "tool" for countries to attract capital.

United States (CFTC/SEC): The U.S. strategy is "recruitment." By approving ETFs and CME/Cboe, it directs institutional flow to domestic, regulated venues. The new government's friendly stance toward crypto in 2025 accelerated this process.

Asia (MAS/HKMA): Singapore and Hong Kong's strategy is "nesting to attract phoenixes." They are building the world's clearest and most institution-friendly customized crypto regulatory framework. Their goal is to become the global institutional crypto hub outside the U.S. The launch of perpetual contracts by SGX is a financial weapon in Singapore's national strategy.

European Union (MiCA): MiCA provides a unified market, but at the cost of being "expensive" and "bureaucratic." It is strong on stablecoins but may lag behind Asia in derivatives innovation due to flexible regulations.

We will see liquidity pools split along geopolitical lines. A fund in Zurich may prioritize Eurex; a family office in Singapore may find SGX to be its first choice; an ETF issuer in the U.S. will be locked into CME. The utopian dream of "global unified liquidity" in cryptocurrencies has been shattered. Instead, a fragmented global market divided by regulatory landscapes has emerged.

This will be a reconstruction without an endgame!

The actions of the Singapore Exchange (SGX) and Cboe at the end of 2025 are not the end of TradFi's invasion but the "D-Day" of this war to reshape the trillion-dollar derivatives landscape.

This war will not have a single winner but will lead to permanent market bifurcation. TradFi giants (CME, SGX), armed with their unparalleled weapon of "trust"—central counterparty clearing (CCP)—will firmly lock down the most fertile territory of "compliant institutions," especially the hedging flow tied to ETFs.

The current dominant CEXs (Binance, Bybit) will not disappear. They are forced to undergo "personality splitting": one part of the business will "onshore" to seek compliance, becoming bloated and slow; the other part will remain "offshore," relying on its unparalleled product breadth and innovation speed to serve high-risk crypto-native funds and global retail.

DEXs (dYdX) represent the ultimate direction of technology, but their fatal flaw of "compliance black hole" means they will remain an "experimental field" for institutions rather than the "main battlefield" for the foreseeable future.

Ultimately, this fragmented market will give rise to the true winners: crypto prime brokerages. Those platforms that can aggregate liquidity from TradFi, CEXs, and DEXs, providing institutions with "one-stop" margin and risk management, will become the "super connectors" of the new landscape. The invasion of TradFi will ultimately push "exchanges" to the sidelines, while "middleware" will reign supreme.

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