Institutional Risk, Data, And Ratings Are Becoming The Next Battleground In Digital Assets

Institutional adoption of digital assets is no longer being held back only by access. At HSC Cannes, a panel featuring leaders from S&P Global Ratings, 21Shares, MetaMask, Mercuryo, the Canton Foundation, and Reactive Network argued that the next major challenge is trust infrastructure, how the industry defines risk, verifies data, and builds rating-style frameworks that institutions can actually rely on.

That shift matters because the market is moving into a new phase. For years, much of crypto’s energy was focused on product launches, listings, and market expansion. Now, as more institutions enter through ETFs, tokenized funds, DeFi exposure, and blockchain-based settlement, the conversation is becoming more familiar to traditional finance. Questions around concentration risk, credit quality, proof of reserves, settlement risk, privacy controls, and legal enforceability are moving to the center.

Institutions are no longer looking at crypto risk the old way

Andrew O’Neill, Managing Director and Digital Assets Analytical Lead at S&P Global Ratings, opened with a simple but important idea: credit is credit and risk is risk. In his view, digital assets do not require inventing an entirely new theory of financial risk. The core risks still come down to default, leverage, concentration, contagion, liquidity, and governance. What changes is how those risks show up in a crypto or DeFi environment.

That framing says a lot about where the market is now. The issue is no longer whether digital assets are too new to evaluate. It is whether the industry can adapt existing risk disciplines to products that move faster, settle differently, and expose institutions to new layers of smart contract and market structure risk.

O’Neill said the real change over the last year or so is that there are finally enough live transactions and structures to assess seriously. Instead of just theoretical proposals, ratings agencies are now seeing Bitcoin-backed securitizations, tokenized funds, stablecoin stability assessments, and even DeFi protocols mature to the point where proper analytical work can be done.

That is a major sign of progress. Institutions tend to arrive not when the technology is merely interesting, but when it becomes measurable.

ETFs have changed the type of risk institutions focus on

Darius Moukhtarzade of 21Shares explained how exchange-traded products have already shifted the institutional conversation. Before ETPs and ETFs became widely available, many institutions saw crypto mainly through the lens of operational risk. They worried about custody, private keys, exchange exposure, and the mechanics of actually holding digital assets.

Products like physically backed Bitcoin ETPs helped abstract much of that away. In Europe, those structures have existed for years, and in the US, the launch of spot crypto ETFs pushed the same transition further. As a result, institutions increasingly evaluate crypto like any other portfolio asset. The questions become more familiar: liquidity, volatility, diversification, correlation, and allocation size.

That does not mean risk has disappeared. It means the risk has changed form. Instead of worrying about wallet security, institutions can increasingly treat crypto as an investable exposure with more conventional portfolio analytics around it.

But that only works for certain products. Once institutions move deeper into tokenized assets, DeFi, or on-chain collateral structures, the older risks come back in new ways.

Smart contract risk and legal structure are still widely underestimated

One of the strongest parts of the panel came when speakers started discussing how badly some market participants still misunderstand tokenized products.

Moukhtarzade made the point bluntly: an unattractive asset does not become a good asset just because it is tokenized or wrapped in an ETF-like product. Tokenization cannot fix weak demand, bad collateral, or poor economics. It can only change the rail on which the product moves.

The same logic applies to yield. He shared an example of dealing with a traditional finance player that wanted to launch a product with DeFi yield. When asked where the yield came from, the answer was simply “from a smart contract.” That response captured a problem still visible across the market. Too many participants, especially those newer to digital assets, still treat technical complexity as if it were an economic explanation.

Melvis Langyintuo of the Canton Foundation added another layer to that issue by focusing on the difference between native ownership and wrapped exposure. In tokenized markets, what an investor actually owns can be very different from what the token appears to represent. If the structure behind the token is just an IOU issued by some intermediary, then bankruptcy or insolvency can turn a seemingly straightforward asset into a messy legal claim.

O’Neill reinforced that warning by pointing out that many tokenized real-world assets are not direct claims on the underlying asset at all. They may be tied to shell companies, offshore structures, or legal wrappers that make enforcement much more uncertain than investors assume. For institutions, that is not a minor detail. It is central to the product’s real risk profile.

The next standards battle will be around data, reserves, and comparability

Another clear takeaway from the panel was that digital asset markets still lack enough standardization in the areas institutions care about most.

O’Neill argued that smart contract standards and even audit standards remain inconsistent. Two different auditors may review similar code bases using very different methods, making results difficult to compare. That creates uncertainty even before an institution gets to asset-level analysis.

Ashna Vaghela of Mercuryo said the market also needs stronger standards around transaction data and reserve reporting. Institutions need to know not just that the data exists, but who stands behind it and whether the assets being represented are actually there. In practice, that means moving toward stronger real-time verification, including proof of reserves and, ideally, clearer links between assets and liabilities.

Moukhtarzade pointed to FTX as the obvious historical lesson. Asset disclosures alone mean little if liabilities remain hidden. That is especially relevant in tokenized markets, where the promise of transparency is often much louder than the actual quality of reporting.

The panel also touched on one of the market’s most dangerous illusions: liquidity. A token can move instantly on-chain, but that does not mean the underlying asset is liquid. A tokenized loan or property interest may still take days or weeks to realize in the real world. That mismatch between on-chain transfer speed and off-chain asset liquidity can create a false sense of safety.

Privacy is becoming a requirement, not a contradiction

Privacy was another major theme, especially for institutions considering serious on-chain activity.

Langyintuo argued that many people still confuse privacy with anonymity. Institutions do not need anonymous markets. They need selective disclosure. They require systems where the concerned parties can view what they should view, when they should view it, without revealing every transaction, strategy, or balance to the entire world.

Such a difference is important since complete public disclosure can be appropriate to the ethos of early crypto, but it can frequently be inconsistent with the functioning of regulated institutions, asset managers, and trading firms. A hedge fund does not desire its trading strategy to be seen in real-time. A bank will not desire client-sensitive information to be publicly disclosed. And even the most common users would not like to have their salaries or account balances traced openly as well.

The panel message was that privacy controls will be needed to enable institutional adoption without affecting the operational value of blockchain.

Clarity is still the missing ingredient

When the panel closed with a quick-fire round on what policy change they would most want to see, the dominant answer was clarity.

For some, that meant the Clarity Act in the United States. For others, it meant clearer risk mitigation rules, more transparent market structures, and stronger regulatory signals for institutions and builders alike. The reason was simple: capital moves more confidently when the rules are understandable.

That may be the clearest conclusion from the session. The next phase of digital asset adoption will not be driven only by new products or new narratives. It will be driven by whether the market can build institutional-grade systems for risk, data, ratings and trust. Without that, adoption remains shallow. With it, digital assets start to look much closer to a permanent part of global finance.

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