Trust After the Fall: What the FTX Collapse Really Changed for Digital Asset Markets

The third edition of insights from the Web3 Trust Summit, hosted by Terminal 3 during Hong Kong Fintech Week 2025, turned its focus to one of the most sensitive and consequential questions in digital assets: what does it actually take to scale trust to an institutional level?

The session brought together senior voices from exchanges, market makers, and blockchain ecosystems, moderated by Lincoln Innes, with panelists Bullish, Auros, and the Solana Foundation. What emerged was not a technology-first discussion, but a candid reassessment of priorities following the November 2022 collapse of FTX.

Solving the Wrong Problems First

One of the panel’s most striking conclusions was that the industry optimised for the wrong signals in its early growth phase. Yield, speed, and user growth dominated decision-making, while governance, counterparty risk, and operational resilience were treated as secondary concerns.

That changed abruptly after FTX.

As Michael Lau of Bullish reflected, regulatory licensing, audits, and transparency were initially met with indifference. Only after systemic failure did proof of reserves, governance structures, and auditability become central to valuation and trust. The shift was not incremental—it was existential. Trust moved from a marketing slogan to a prerequisite for survival.

This inflection point mirrors patterns long seen in traditional finance: markets often undervalue resilience until the first major shock exposes its absence.

Trust Is Human Before It Is Technical

While much attention is placed on cryptographic proofs and infrastructure, the discussion surfaced a less comfortable truth: trust is still deeply personal. Le Shi of Auros highlighted how, during the industry’s reckoning, professional lineage and institutional culture mattered as much as technology.

Participants increasingly assessed counterparties not just by on-chain transparency, but by who was behind the operation—whether teams came from conservative, regulated TradFi backgrounds or from less scrutinised environments. In this sense, Web3 did not escape human trust dynamics; it amplified their consequences.

This represents a clear maturation of the market. Blockchain transparency does not remove counterparty risk—it accelerates its impact when governance fails.

The Coordination Gap Holding Back Scale

If trust within firms has improved, trust between systems remains fragmented. Nowhere is this more visible than in Hong Kong. Despite deep capital markets, advanced infrastructure, and proactive regulators, progress remains uneven.

As Lu Yin of the Solana Foundation observed, Hong Kong has all the components required for digital assets to scale—but alignment between regulators, banks, and market participants remains incomplete. Each stakeholder waits for the others to move first.

Banks seek regulatory certainty before onboarding crypto clients. Regulators want proven, stable business models before expanding frameworks. Builders need both banking access and regulatory clarity to justify long-term investment. The result is a circular dependency that slows momentum.

This is not unique to Hong Kong. It is a structural challenge facing most major financial centres attempting to bridge traditional finance and decentralised systems.

The Institutional Scale Problem Few Address Openly

Beyond coordination, the panel addressed a deeper structural issue: market depth. For sovereign wealth funds and large asset managers, crypto presents an uncomfortable dilemma. Allocate capital at a scale that matters to their balance sheet, and they risk distorting the market. Allocate less, and the effort is operationally unjustifiable.

With global equities exceeding US$120 trillion in market capitalisation and crypto hovering around US$3 trillion, there is little middle ground for institutions seeking meaningful exposure without outsized impact. Many remain unconvinced that current market structures can absorb large-scale institutional flows without instability.

At the same time, as centralised exchanges adopt stricter KYC and regulatory controls to attract institutional capital, they move away from the permissionless access that originally drove retail adoption. Those users have not disappeared—they have shifted toward decentralised protocols, creating a bifurcated ecosystem with fundamentally different trust models serving different constituencies.

A Narrow Window for First Movers

Regulation is also compressing competitive timelines. Once a jurisdiction finalises a workable framework, innovators move quickly. Financial infrastructure benefits from strong network effects, and early movers tend to entrench advantage.

The implication is clear: jurisdictions that hesitate risk losing entire ecosystems to faster-moving peers. But decisive action requires rare alignment across public and private sectors—a challenge that few markets consistently achieve.

What Actually Builds Trust Going Forward

Despite different perspectives, the panel converged on a shared conclusion. Trust in digital assets is not a binary state achieved through licensing, audits, or technology alone. It is a continuous process.

Education, coordination, operational discipline, and time all matter. Longevity itself becomes a signal—firms that survive multiple cycles, execute consistently, and adapt to regulatory expectations earn credibility that cannot be fast-tracked.

The infrastructure is improving. Regulatory frameworks are emerging. Institutional capital is watching closely.

The unanswered question is whether key markets can coordinate quickly enough to convert interest into sustained participation—or whether caution will continue to outweigh conviction.

Where do you see the biggest coordination failures still blocking institutional adoption of digital assets?