Posted: 23/07/2025 | Read time: 3 minutes
Jim Sadler is Chief Product, Technology and Operations Officer at AutoRek.
The cryptocurrency revolution has reached a turning point. With institutional adoption accelerating across global financial centres, digital assets are no longer an experiment – they’re becoming essential infrastructure for modern finance. Yet beneath the headlines celebrating new crypto products and digital currency developments, an operational crisis is quietly constraining the industry’s growth potential.
The problem isn’t what most people expect. It’s not regulatory uncertainty, market volatility, or even cybersecurity concerns. Instead, it’s a fundamental limitation embedded in the legacy systems that power global finance – often so basic that many institutions don’t realise it exists until it’s too late.
The precision gap
Traditional financial systems were designed for a world of conventional assets operating at limited decimal precision. A stock price of $45.67, a bond yield of 3.250%, or a foreign exchange rate of 1.2345, for example. Until now, financial systems have been built to operate within these parameters.
Cryptocurrencies shatter these boundaries. Ethereum, the world’s second-largest cryptocurrency, operates at 18 decimal places. A single transaction might involve 0.000000000000000001 ETH. This level of precision often causes traditional reconciliation systems to round incorrectly, truncate data, or introduce systematic inaccuracies, ultimately causing operational challenges.
When reconciliation systems can’t handle the full precision of crypto transactions, they introduce rounding errors that accumulate over time. What appears as a minor discrepancy in a single transaction becomes a material difference when trading at high value and across thousands of records. For institutions managing large crypto portfolios, these accumulated discrepancies can compound with significant financial implications.
The digital asset economy constraints
The infrastructure crisis extends beyond operational inconvenience. It’s creating constraints that limit how institutions can participate in the digital asset economy.
Modern crypto operations are a complex web. Institutional clients increasingly demand services that mirror traditional finance: custody, prime brokerage, lending, and derivatives trading. Each of these services requires precise reconciliation across multiple systems, counterparties, and asset types.
When operational infrastructure can’t accurately track underlying assets, institutions face service limitations. They may be restricted to basic custody or simple trading – services with lower margins and limited differentiation. On the other hand, competitors with appropriate infrastructure can offer more sophisticated products and secure higher-value opportunities.
The precision gap also constrains innovation. As new crypto asset classes emerge, institutions need operational flexibility to adapt quickly. Legacy systems may lock firms into rigid processes that can’t accommodate new asset types or evolving market structures.
Regulatory burden
On top of strategic constraints, and perhaps the most concerning impact of the infrastructure crisis, is the compliance risks it creates.
The regulatory landscape is evolving rapidly, and organisations must keep pace to stay compliant. Global regulators are increasingly focused on ensuring that crypto assets receive appropriate operational controls, particularly when held on behalf of clients.
Regulatory bodies worldwide are developing frameworks that emphasise proper safeguarding and control procedures for crypto assets. These emerging requirements often reference traditional financial control standards, adapted for the digital asset context.
The challenge is that traditional reconciliation requirements become more complex when applied to crypto assets. Daily reconciliation procedures that work effectively for conventional securities may prove inadequate for assets that trade continuously and require extreme precision for accurate representation.
Financial institutions must also provide accurate position reports to regulators and clients. When underlying systems can’t accurately represent crypto holdings, reports become unreliable, exposing institutions to compliance risks.
Building for the future
As institutional participation in cryptocurrency markets grows across multiple jurisdictions, operational infrastructure requirements will become increasingly demanding. The technology solutions needed to address precision gaps and compliance challenges exist today – the question is whether institutions will make the necessary investments.
Institutions that proactively upgrade their operational capabilities while market structures and regulatory frameworks are still developing will gain significant advantages. Early adopters can offer sophisticated crypto services while maintaining rigorous operational controls, positioning themselves for operational efficiency, enhanced risk management and expanded service capabilities.
Those that continue relying on inadequate infrastructure will find themselves increasingly constrained by operational limitations. As the crypto market matures, operational excellence is becoming as critical as investment strategy or regulatory compliance.