A Crypto Counterparty Consolidation Playbook: The Hows and What-To-Dos of Changes In The Industry

Over recent months the Crypto Insights Group operational risk blog has provided a series on digital asset counterparty risk management. Topics and research on the matter has ranged from best practices and due diligence for crypto counterparties, to the impacts of significant market liquidity events and their subsequent lessons.

However, as we prepare for a “return to school,” as it were, with the summer drawing to a close over the coming weeks, there is another aspect of counterparty risk to consider, which has had meaningful implications for crypto investment managers and digital asset allocators throughout 2026… Counterparty consolidation.

What’s the Big Deal?

As has been widely reported over the preceding months of 2026, crypto financial services consolidation has reached a total value of nearly $16 billion, to-date, exceeding deal volume and dollar amounts over previous years, with significant examples represented by Bullish acquiring Equiniti for $4.2 billion to scale tokenized equities, Kraken’s parent company taking over Bitnomial to grow their derivatives business, and Standard Chartered deciding its venture investment in Zodia’s custody business was a better fit as an in-house service.

In addition, there has been a near-constant stream of other related counterparty news arriving in various forms. 

First, what feels like a near weekly announcement of senior staff leaving their posts to start new businesses or moving to different industries. Examples include, the CEO of Galaxy Digital Europe teaming up with BitGo’s former Head of Trading, Coinbase’s Chief Legal Officer’s departure, after leading legal and regulatory efforts for six years, and one of Anchorage’s institutional services leaders leaving to build up Morgan Stanley’s digital assets offering.

Secondly, is counterparties downsizing their operations, with recent examples of Coinbase reducing headcount by 14% (May 2026), BitGo letting go of 15% of staff (June 2026), and FalconX announcing lay offs for 10% of global employees, just a few days ago.

Third, and perhaps more concerningly for the industry and its impact to market liquidity, are well established exchanges, such as BitMEX, BitMart and AscendEX, all announcing their respective shut-downs over recent weeks.

The considerations of such corporate activity demonstrates a number of practices and questions to address from an operational risk perspective:

• Many digital asset trading businesses are clearly trying to adjust to the decrease in revenue relative to their expenses. Are you, as a fund manager with counterparty risk, or an institutional allocator investing in such managers, asking questions and conducting due diligence on a respective counterparty’s financial status? Some of the large centralized exchanges are publicly traded companies, and increasingly some global crypto custodians are tying up with, or are themselves, traditional banks, all of which have access to equity or debt markets. But what is the financial state of those counterparties, either CEXs, DEXs or custodians, that are privately backed?
• Staff reductions are often publicized as necessary for a business through its lifecycle, but has your service-level with your counterparty suffered as a result of it? Are you ensuring you have established any pre-defined key performance indicators (KPIs) before entering into an institutional service agreement? Have you considered negotiating fair fees for a reduction in product offering, liquidity or relationship management?
• Consolidations may stabilize a business, but what impact does that have on trading operations? As an investment manager, are you receiving any benefit in the merging of an existing spot counterparty with a recently acquired (or built) derivatives or perpetuals business? Specifically, is your book considered as one relationship with associated economic benefits? Or is each business line within a larger counterparty focused on their PnL rather than you, or your fund, as a valued client?

• For allocators… Is the manager still able to effectively and efficiently manage a strategy with fewer trading venues? Has a manager been keeping a list and conducting due diligence for counterparty diversification?

TradFi Has (Really) Arrived

Being a participant in the liquid crypto space, the above certainly adds elements of enhanced risk, but it’s not all negative.

2026 has also presented a number of opportunities for digital asset management to expand beyond the familiar crypto-native crowd, with new counterparty options including an ever increasing crypto product set by brokers such as Robinhood and Interactive Brokers, many more traditional banks and their respective custodians offering an ever larger ability to trade and hold spot tokens beyond Bitcoin and Ether, a growing list of many traditional financial services companies now offering trading and yield generating capabilities, as Galaxy and BNY announced their recent staking partnership, and the growing services being offered for tokenized securities, like that now being offered by NASDAQ.

As more of the above traditional profiles enter the markets, it is important to remember nearly all of the “old” names already come pre-built with legal and regulatory frameworks, which, in theory, should create a more appealing offering for many digital asset managers trying to establish large institutional allocators as clients, many of which have generally shied away from crypto due to the lack of legal and regulatory clarity (No pun intended with respect to the U.S. Clarity Act).

However, just because the participants may be changing, it doesn’t mean risk management becomes an afterthought. 

Both crypto managers and their investors should remain vigilant about understanding and adapting to the evolving market landscape. For example:

• Traditional counterparties have high standards with respect to their client onboarding process. Therefore, as a fund manager, and your fund as a potential client, you should be prepared to demonstrate your business is meeting certain standards in operations, transparency and disclosures. 
• Although you may be trading or keeping custody with a traditional broker or bank, counterparty risk becomes all the more important as consolidation and counterparty failures since the Global Financial Crisis (with its echoes still reverberating today) has increased the risk of market issues due to the growth in systemically important financial institutions (i.e., ensure you have back up trading partners across both crypto and TradFi).
• Although traditional institutions may present better financial stability, they also come with increased legal and regulatory liability. So ensure you, as a manager or allocator, are keeping up with significant lawsuits and regulatory violations, as a big settlement or penalty may sink a businessline and leave a fund without a back up if the team you work with winds down.

Experience Counts

Through our combined decades of both traditional and crypto markets experience, the Crypto Insights Group team has seen the changes that reformed the traditional financial services industry, the changes maturing the digital assets industry, and now the blending of both. It is one of the reasons why we have been able to help native crypto counterparties and managers understand what it takes to attract capital from traditional participants, and also educate the traditional side of the benefits crypto has to offer.

Being in the middle of many conversations which occur in the venn diagram of crypto investment strategies and potential pools of capital has enhanced CIG’s offerings and services, across technology, data, research and due diligence, needed to usher in a new phase of digital asset investing. In addition, our own professional experience with onboarding our services with both crypto and traditional organizations has also taught us the value in ensuring internal institutional operations are able to meet the highest standards expected of any business.

If you couldn't answer the questions above with documentation, you're not alone. Most managers we review can name their counterparties but can't evidence the diligence behind them. CIG actively runs counterparty ODD on behalf of our clients and refreshes it on an ongoing basis.

‍Contact us to learn more about ways Crypto Insights Group can help you enhance your digital assets business and enhance the management of your counterparty risk review processes.