Blockchain & Digital Assets Weekly Briefing - Week 43
- danae317
- 16 hours ago
- 12 min read
Week ending 24th October 2025
This week in digital assets: JPMorgan broadens its crypto ambitions—from Bitcoin ETFs to direct tokenised collateral—signalling growing institutional confidence. Russia faces a crypto paradox, legalising cross-border payments while tightening domestic control. At the Fed’s innovation conference, Chainlink founder Sergey Nazarov advocates for “parallel regulated DeFi.” Meanwhile, the Fed releases its “skinny” master account framework, reshaping access for digital institutions. And BlackRock opens UK retail access with its first iShares Bitcoin ETP on the LSE.
From Bitcoin ETFs to direct crypto collateral: JPMorgan deepens its foray into digital assets.
Russia’s crypto conundrum: legalising cross-border payments while cracking down at home.
Chainlink's co-founder Sergey Nazarov calls for “parallel regulated DeFi” at the Fed’s Innovation Conference.
Slim-line access: the Fed’s ‘skinny’ master account blueprint and what it means for digital assets.
BlackRock opens the door for UK retail investors with the first iShares Bitcoin ETP on the London Stock Exchange.
From Bitcoin ETFs to direct crypto collateral: JPMorgan deepens its foray into digital assets
JPMorgan Chase is expanding its crypto integration by allowing institutional clients to use Bitcoin and Ether as collateral for loans, according to a Bloomberg report, a move expected to roll out globally by the end of 2025. This follows the bank’s June announcement (see our WeeklyBriefing 23 here) that it would accept Bitcoin ETFs as collateral—marking a significant evolution from indirect to direct exposure to digital assets.
A Strategic Expansion
Under the new programme, clients will be able to pledge Bitcoin and Ether held with third-party custodians to secure loans. The assets won’t sit on JPMorgan’s balance sheet, limiting direct market exposure while expanding credit flexibility for clients.
This approach allows the bank to meet growing institutional demand for crypto-backed financial products without breaching regulatory capital constraints, meaning that JPMorgan is structuring this programme so that it doesn’t increase the amount of regulatory capital the bank must hold under banking rules (like Basel III). It also builds on JPMorgan’s growing blockchain and tokenisation initiatives, including its JPM Coin and Onyx platform.
Why It Matters
Institutional Legitimisation: Allowing crypto as loan collateral reflects a gradual normalisation of digital assets in mainstream finance.
Credit Efficiency: Investors can unlock liquidity without liquidating crypto positions, potentially supporting broader asset-class adoption.
Competitive Pressure: The move may push other major banks to accelerate similar offerings to retain high-value clients.
Russia’s crypto conundrum: legalising cross-border payments while cracking down at home
In a strategic pivot, Russian authorities are introducing a new regulatory framework for the cryptocurrency market that seeks to allow – yet strictly control – the use of digital assets for cross-border payments, while imposing tougher restrictions and penalties on domestic crypto activity.
According to the report from The Moscow Times on 22 October 2025, the moves are being coordinated by the Ministry of Finance of the Russian Federation (MOF) in tandem with the Bank of Russia (CBR).
What’s Changing
Russia plans to legalise crypto-enabled cross-border payments under an experimental legal regime (ELR). This follows the legalisation of crypto mining and cross-border settlements in an initial phase last year.
At the same time, the authorities aim to dramatically tighten control over domestic crypto usage. The CBR proposes to ban most crypto transactions between Russian residents unless they are carried out via authorised firms and confined to “very, very limited” investor classes.
The Prosecutor General’s office is empowered under the new framework to prosecute illegal crypto circulation and to seize assets linked to corruption, extremism, terrorism and drug trafficking.
Both MOF and CBR expect the regulatory package to be finalised by year-end.
Why This Matters
For the digital-asset ecosystem this presents a complex signal. On one hand, the legalisation of cross-border crypto payments may open pathways for international transactional use, potentially increasing utility and clarity for certain actors. On the other hand, the tightening of domestic use, prohibition of retail access and the risk of criminal penalties introduce significant constraints for everyday users and smaller investors.
Russia’s action appears to reflect both economic and geopolitical motivations. The Moscow Times reports that the country’s previous opposition to crypto-based payments has softened in light of Western sanctions that have constrained access to international payment systems.
Unpacking the Contradictions
While the legalisation of some crypto activities may appear progressive, the broader regulatory posture suggests a fundamentally restrictive approach:
The CBR maintains that crypto should not be recognised as a legitimate means of payment within Russia, despite the ELR for cross-border cases.
The proposed ban on domestic transactions implies that many Russian holders of crypto assets may face uncertainty: the regulator has not publicly clarified how it will deal with existing holdings.
The MOF signals a more liberal stance, advocating a gradual approach and broader participation, but the CBR appears dominant in setting policy tone.
Critical Observations
The legalisation of cross-border crypto payments is significant —but only under an experimental legal regime (ELR) that may carry restrictive terms; thus the scale and scope of real change remain to be seen.
The tightening of domestic uses may reflect a desire not just for regulatory oversight but for state control of flows – which could conflict with market innovation and decentralised aspects of crypto.
The unclear treatment of existing crypto holdings poses a risk: without explicit grandfathering or transition rules, users may be exposed to legal or regulatory surprises.
The duality of policy (liberalising one segment while restricting another) introduces complexity for stakeholders, likely raising compliance costs and jurisdictional fragmentation.
Stakeholders inside and outside Russia should watch closely – the devil will be in the regulatory details, enforcement approach and the treatment of existing market participants.
Chainlink's co-founder Sergey Nazarov calls for “parallel regulated DeFi” at the Fed’s Innovation Conference
At the Federal Reserve’s Payments Innovation Conference on 21 October 2025, Sergey Nazarov, co-founder of Chainlink Labs, delivered one of the event’s most consequential interventions (see 1:49:44). He argued that for institutional finance and decentralised finance (DeFi) to truly converge, the industry must build a parallel, regulated DeFi system—a version designed specifically to handle compliant capital and meet regulatory standards without dismantling DeFi’s core architecture.
Three structural hurdles to integration
Nazarov outlined three major obstacles that must be overcome before banks and financial institutions can safely integrate with blockchain networks:
a. Legacy system compatibility
Many financial institutions still rely on decades-old infrastructure and established messaging standards such as SWIFT. These systems meet strict legal and regulatory requirements, so they are unlikely to be replaced soon. The challenge, Nazarov explained, is to synchronize them with blockchain networks using open standards—so that even small engineering teams can bridge existing compliance, data, and key-management systems efficiently.
b. Transaction design and data transparency
After institutions connect their internal systems to blockchains, the next step is making sure that every transaction works properly across both worlds. Each transaction must include all the information needed for business operations while also meeting regulatory and audit requirements. In practice, this means the data must flow correctly to the receiving blockchain and be securely stored in places where regulators or counterparties can verify it later. Getting this right is crucial to prove that each transaction is accurate, compliant, and trustworthy.
c. A compliant DeFi layer for institutional capital
The final challenge, he said, is that DeFi protocols themselves must evolve:
“You need the destination of the transaction—in this case the DeFi protocols—to have what’s called a regulated DeFi variant. All the DeFi folks need to make these separate parallel versions that are able to interact with all this regulated capital.”
To attract regulated capital, DeFi platforms will need to build parallel, compliant versions of their protocols—essentially creating a “regulated DeFi” environment that can interact safely with banks, funds, and other institutional players. In this model, DeFi protocols would take on responsibilities similar to traditional financial institutions, such as verifying counterparties and managing liquidity according to regulatory standards.
If this can be achieved, DeFi could offer institutional investors a new way to access yield on U.S. dollar assets—potentially lower than today’s double-digit returns, but still attractive compared with conventional markets.
📘 Definition: Regulated DeFi Variant A Regulated DeFi Variant is a version of a decentralised finance (DeFi) protocol that is specifically designed to comply with financial regulations and interact with traditional, regulated capital. It maintains DeFi’s core features—automation through smart contracts and on-chain transparency—but adds safeguards such as:
In essence, it’s a parallel version of existing DeFi platforms—built to allow banks, funds, and other regulated entities to participate securely in decentralised markets. |
Why this matters
Nazarov’s remarks captured a pivotal shift in digital finance: the acknowledgment that DeFi must adapt to attract institutional money.
Institutions need compliance and auditability. They cannot engage without reliable standards for ownership, reporting, and counterparty verification.
DeFi must create a regulated mirror. A “parallel” DeFi environment would allow compliant capital to flow in without compromising decentralisation elsewhere.
Cross-chain data and compliance automation are key. Smart contracts can act as the connective tissue between legacy systems, regulators, and on-chain processes—offering verifiable proof of compliance.
This model aligns with projects like Chainlink’s work on cross-chain compliance (CCIP) and Circle’s ARC framework, which aim to bridge institutional systems with decentralised networks.
Critical reflections
While Nazarov’s vision is technically sound and forward-looking, several open questions remain:
Governance and oversight: Who defines and enforces “regulated DeFi” standards?
Economic trade-offs: As yields compress under regulation, will DeFi retain its appeal?
Fragmentation risk: If each jurisdiction or protocol builds its own compliant version, interoperability could fracture.
Operational complexity: Integrating COBOL-era systems (very old programming language from the 1960s) with smart-contract infrastructure is far from trivial—“five engineers” may be an understatement.
The road ahead
That the Federal Reserve is now openly hosting discussions on regulated DeFi would have been unthinkable just a year ago, Nazarov noted. Yet this growing engagement marks a significant turning point in how public institutions view blockchain-based finance.
Nazarov expects the industry to go through a two- to five-year transition period in which hybrid systems will dominate. During this phase, legacy financial infrastructure—built around strict legal, accounting, and compliance requirements—will need to operate side by side with blockchain networks.
He explained that this transition is unavoidable because existing institutional systems are deeply embedded, heavily regulated, and represent massive prior investments. They cannot simply be replaced overnight. Instead, the next few years will focus on synchronizing traditional systems with blockchains—a process that includes integrating legacy data sources, established messaging standards like SWIFT, and new blockchain-based networks through interoperability tools such as Chainlink’s CCIP (Cross-Chain Interoperability Protocol).
This hybrid phase, according to Nazarov, will act as a bridge between eras: one foot in the traditional world of compliance, records, and oversight, and the other in a programmable, transparent, and automated blockchain environment. As regulation and technology mature in parallel, those hybrids will eventually give way to fully on-chain financial operations.
The message to DeFi developers and institutions alike is clear: the path forward is evolution, not replacement. Regulated DeFi will emerge not by dismantling the old system but by connecting it intelligently to the new one.
Slim-line access: the Fed’s ‘skinny’ master account blueprint and what it means for digital assets
In comments delivered at its October 21 2025 Payments Innovation Conference, Federal Reserve Board Governor Christopher J. Waller introduced a notable proposal: a streamlined version of the traditional master account — dubbed a “skinny” master account — aimed at broadening access to central bank payment services while limiting risk exposures.
What is the “skinny” master account?
In his speech, Waller explained that currently, the Federal Reserve provides full master accounts (and related services) to legally eligible institutions under a strict evaluation regime. The proposed new “payment account” concept would offer a simplified variant of that access:
It would be available to eligible institutions that focus primarily on payments innovation, and which might not need the full suite of services that come with a traditional master account.
Called a “skinny” master account for shorthand, Waller described it as “access to the Federal Reserve payment rails while controlling for various risks”.
Key design features:
No interest paid on balances.
Balance caps may be imposed.
No daylight overdraft privileges — if the account balance drops to zero, payments would be rejected.
No access to discount-window borrowing or the full array of Fed services where risks cannot easily be controlled.
The intention is to speed up the review/approval process for these accounts — “a streamlined timeline for review” so that payment-innovation firms can more rapidly engage with the Fed’s infrastructure.
Why is this being proposed — and what’s the context?
Waller framed the move within a broader shift in the payments landscape:
He noted that technologies such as stablecoins, tokenised assets on distributed ledgers, and AI are no longer fringe but increasingly integrated into mainstream payments.
He emphasised that the Federal Reserve sees its role not purely as a regulator or observer but as an active participant in enabling infrastructure evolution.
The “skinny” account is described as a response to “a new reality” in payments — one in which non-bank payment innovators may wish to access core rails without the full set of bank-style services or regulatory burdens that a traditional master account entails.
Thus, the rationale: to enable a wider set of firms — especially those innovating in digital assets or payments — to plug into the Fed’s infrastructure more directly, while managing risks to the Fed and the system.
What are the potential benefits for the digital-assets/fintech world?
Lower barrier to infrastructure access: Fintechs and crypto-native firms may find it difficult to obtain a full master account due to regulatory, operational or capital constraints. The “skinny” model could open participation in Fed services.
Deeper integration with payment rails: The ability to access Fed payment rails could facilitate more innovative payment models, tokenised-asset flows or real-time settlement, aligning with the broader industry trend.
Regulatory clarity and recognition: The mere fact the Fed is publicly discussing a tailored account for innovation firms signals the central bank recognises the shift in the ecosystem and may provide a clearer pathway for non-traditional players.
What are the caveats, risks and open questions?
It is still a concept, not yet a policy: Waller made clear this is a “prototype idea” under study, not a firm commitment to implementation.
Risk-control limitations may matter: Exclusion of interest payments, balance caps and prohibition on overdrafts limit the product’s attractiveness compared to full bank-style access. These constraints may deter some firms or limit utility.
Eligibility and scope undefined: Who qualifies as “legally eligible” and what precise service set will be offered remains unspecified. The devil will be in the details of eligibility criteria, caps, fees, and service definitions.
Interplay with regulation and supervision: Payment innovators accessing Fed infrastructure may raise questions around supervision, prudential regulation, deposit insurance, anti-money-laundering oversight, etc. The speech did not fully unpack how these will be handled.
Potential balance-sheet and systemic implications: While the Fed proposes to limit risks (caps, no interest etc), any expansion of access to its rails may still introduce new exposures (operational, settlement, liquidity) that need careful oversight.
Impact on incumbents: Traditional banks with full master accounts may face competitive pressure from more nimble firms with “skinny” access. How the Fed balances innovation with system stability will be important.
Why this matters for digital assets and payments watchers
For stakeholders in digital assets, tokenisation or payments innovation, the Fed’s proposal is a signal: central infrastructure is opening (potentially) to non-traditional players. That can reduce reliance on banks as intermediaries, shorten settlement chains, and potentially enable new business models. On the flip side, it also means firms must be prepared for Fed oversight, eligibility assessments, service constraints, and compliance obligations.
Final thoughts
The “skinny” master account proposal by the Fed is a cautiously optimistic step toward modernising access to central-bank payment infrastructure. It recognises the changing shape of payments and digital assets, and the need for the central bank to adapt. Yet, because the plan is still in prototype form, many questions remain — from eligibility and service scope to risk oversight and market impact.
For digital-asset innovators, this is a development to watch closely. If and when the Fed translates the concept into a formal policy, participating firms may need to navigate both opportunity (direct infrastructure access) and responsibility (compliance, risk controls).Until then, the concept offers a clear message: the Fed wants to be part of the innovation wave — but on its own terms.
BlackRock opens the door for UK retail investors with the first iShares Bitcoin ETP on the London Stock Exchange
On 20 October 2025, BlackRock listed its iShares Bitcoin ETP (ticker: IB1T) on the London Stock Exchange (LSE), giving UK retail investors a new regulated route to exposure in Bitcoin via a traditional brokerage account rather than direct ownership of the cryptocurrency.
What is being launched?
The ETP is physically backed by Bitcoin: BlackRock states that each security is backed 100% by Bitcoin held via Coinbase custody (including segregated, offline cold-storage) rather than synthetic exposure.
The product was launched for UK retail investors via the LSE, following regulatory change by the Financial Conduct Authority (FCA) that now permits certain crypto-ETPs to be offered to retail.
BlackRock positions this as a simpler gateway for investors to gain Bitcoin exposure without directly trading or storing crypto themselves.
Why does this matter?
Broader access: For UK retail investors who have been reluctant or unable to deal with crypto exchanges, crypto wallet custody and self-custody, this offers an on-exchange regulated alternative via standard brokers.
Institutional endorsement: BlackRock is the world’s largest asset manager; its move signals that major traditional finance firms now consider crypto investment products as part of mainstream asset management.
Regulatory evolution: The FCA’s decision to allow retail access to crypto ETPs marks a shift in the UK’s stance toward digital-asset investing.
Transparency & custody: By emphasising physically-backed assets and using regulated custody (Coinbase → cold storage) the product claims to mitigate some of the risks associated with direct crypto holdings (wallet loss, exchanges failing).
Regulatory environment still evolving
The UK regulatory framework for crypto-assets remains cautious. While this product is approved, the broader regulatory regime may change, which could affect access, tax treatment, or eligibility for certain investor segments.
WHAT WE ARE READING (OR WATCHING)
Governance Watch
Crypto Leaders Hit Capitol Hill to Push Market Structure Bill
Reform UK leader Farage says crypto donations have begun
The Onboarding Wave
Walmart-backed fintech OnePay is bringing crypto to its banking app, sources say
The Nakamoto Engine
BlackRock Is Pulling Bitcoin Whales Into Wall St’s Orbit
Beyond the Chain
T. Rowe Is Aiming to Beat an Index of Investments — in Crypto
Wipeouts Threaten Korea Retail Army Chasing Riskiest Investments
Canadian Province Moves to Limit AI Power Use, Ban Crypto Mining
This article is for informational purposes only and should not be considered financial advice. Please do your own research or consult a licensed financial advisor before making investment decisions.
