Banks are embedding crypto trading into their own apps, while exchanges are retreating to the backend of the financial system.

By: Xiao Bing

On August 14, Bank Leumi, Israel's largest bank, announced a partnership with Galaxy Digital. The plan is to enable its 2.5 million retail customers to buy, sell, and hold BTC, ETH, and SOL directly within the bank's proprietary Leumi Trade app. Galaxy Digital will provide trade execution and custody infrastructure, with the service expected to launch in early 2027.

As banks begin to embed crypto trading into their own apps, crypto exchanges are transitioning from being "consumer-facing brands" to becoming "pipelines hidden behind banks."

Let's first look at the division of labor in this partnership.

Bank Leumi is responsible for: customer relationships, KYC (Know Your Customer), compliance, bank accounts, funding channels, and most importantly—the brand. Customers open Leumi Trade, see the bank's logo, and place their trust in a financial institution that has existed for 120 years.

Galaxy is responsible for: trade matching (via the GalaxyOne Institutional platform), asset custody (through its subsidiary GK8), and liquidity access. Every buy and sell order placed by users is actually executed within Galaxy's systems.

In this partnership, Bank Leumi's role is closer to that of a licensed distribution channel rather than a trading service provider. The bank has not built its own trading engine, set up a custody system, or integrated with liquidity pools. Instead, it has wrapped Galaxy's capabilities in its own branding and embedded them into the app that its 2.5 million customers open daily.

For the bank, this is the most rational choice. Building proprietary crypto trading infrastructure involves high costs, long development cycles, and significant compliance risks. By integrating with Galaxy, the bank effectively accesses a full suite of regulatory-approved trading and custody capabilities via API, allowing it to focus on what it does best: managing client relationships and funding channels.

Bank Leumi is not the only traditional financial institution that Galaxy has signed this year.

In early August, Bank of New York Mellon (BNY) announced a partnership with Galaxy to integrate Galaxy’s staking infrastructure into BNY’s digital asset custody platform. This allows institutional clients to participate in Proof-of-Stake (PoS) network staking without leaving BNY’s custody framework. With $62.6 trillion in assets under custody, BNY is the world’s largest custodian bank.

In June, Morgan Stanley’s wealth management division selected Galaxy as its staking service provider, offering staking yields on Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) to its accredited high-net-worth clients. Galaxy also serves as a node operator for BlackRock’s FETH Ethereum staking ETF.

With the addition of Bank Leumi, Galaxy secured three key nodes within the global financial system by the summer of 2026: the largest custodian bank, one of the largest wealth management platforms, and the entire retail crypto business of a leading regional bank. Galaxy disclosed that its institutional contract pipeline totals $30 billion.

When Mike Novogratz founded Galaxy in 2018, it was positioned as a crypto investment firm engaged in buying coins, market making, and project investments.By 2026, Galaxy is transforming into a crypto infrastructure provider for traditional financial institutions. It bundles trading, custody, staking, and compliance services for banks and asset managers, while receding into the background.

This transformation follows a clear business logic: crypto trading for retail users is a red ocean, with profit margins driven down to very low levels by competitors such as Coinbase, Robinhood, and local exchanges in various countries.However, institutional infrastructure represents a blue ocean. Banks are willing to pay a premium for compliance, security, and integration capabilities, and once integrated, switching costs are extremely high.

This evolutionary path is not unprecedented in financial history.

Your credit card may bear the logo of China Merchants Bank or Chase, but the clearing and settlement of every transaction are handled in the background by Visa or Mastercard. Consumers recognize the banks, not the clearing networks. Banks own the customer relationships and deposits, while clearing networks possess transaction processing capabilities and global connectivity. Each party takes what it needs.

Crypto trading is moving toward a similar structure. Clients of Bank Leumi buy Bitcoin on Leumi Trade without knowing, nor needing to know, about Galaxy Digital's existence. It is just like using your China Merchants Bank credit card to buy coffee without giving a thought to Visa.

If this trend persists, value distribution within the crypto industry will undergo a fundamental restructuring. Banks, which control user relationships and capital gateways, capture brand premiums and customer loyalty. Infrastructure providers offering back-end trading and custody capabilities (such as Galaxy Digital, Coinbase Prime, and Fireblocks) earn technical service fees, which are stable but come with limited profit margins.

In April this year, John D'Agostino, Head of Institutional Business at Coinbase, made an insightful remark: banks face a "buy, build, or rent" choice when entering the crypto business. He predicts that most banks will choose to "rent." Given that the crypto market's size remains only 3%-5% of the global equity and fixed-income markets, banks lack the incentive to build a complete infrastructure suite from scratch.

This trend presents a nuanced situation for Coinbase.

On one hand, Coinbase Prime is already the world's largest crypto institutional services platform, providing trading, custody, and financing services to over 240 banks, brokerages, and fintech companies, with custodial assets exceeding $350 billion. It serves as both an exchange and an infrastructure provider.

On the other hand, Coinbase also operates the world's largest retail crypto trading brand. When bank clients can buy Bitcoin directly within their banking apps, how many reasons do they still have to open the Coinbase app?

This is a classic case of channel conflict. If Coinbase goes all out to help banks build crypto trading capabilities, it aids them in cannibalizing its own retail user base. If it restricts technology exports to banks, pure-play infrastructure firms like Galaxy Digital, Fireblocks, and BitGo will step in to fill the void.

D'Agostino's response is that the crypto market is still in its early stages, the overall pie is growing, and institutional and retail businesses can grow in parallel. This argument holds during periods of market expansion. However, once penetration reaches a certain level and growth slows, competition between bank channels and proprietary retail operations will become inevitable.

Galaxy Digital does not carry this burden. It launched the GalaxyOne platform for retail investors at the end of 2025, but its scale is far smaller than Coinbase’s retail business. Galaxy’s core revenue is increasingly reliant on institutional infrastructure, allowing it to serve banks without hesitation, as the banks’ success is synonymous with its own.

A detail in Bank Leumi’s announcement: crypto trading will take place within a 'dedicated secure zone' in the Leumi Trade app.

This product design choice reveals much. For banks, crypto is merely a new offering on the capital markets service menu. It sits alongside stocks, bonds, and funds, subject to the same compliance frameworks and settled through the same account systems. There are no seed phrases, no gas fees, and no on-chain interactions.

If more banks follow Bank Leumi’s path over the next five years, leveraging Galaxy or Coinbase’s backend to offer crypto trading within their own apps, the crypto industry will undergo a counterintuitive transformation:It will become quieter.

There will be no need to educate users on wallets, private keys, or on-chain confirmations. The bank handles all of this. Users do not even need to know that their Bitcoin is custodied by Galaxy’s GK8 cold storage. They only need to know that it is a bank-provided service, protected by regulation, and as simple as buying a mutual fund.

For industry practitioners, this represents both a victory and a loss.

The victory lies in crypto assets finally being embedded into the capillaries of mainstream finance, reaching ordinary depositors who would never download Coinbase or Binance. The loss is the erosion of the crypto industry’s proud brand identity and narrative of user sovereignty. As Bitcoin becomes just another button in a banking app, Satoshi Nakamoto’s vision of "trustless intermediaries" drifts further from reality.

But markets never follow idealistic scripts. Capital flows through the path of least resistance. For Bank Leumi’s 2.5 million clients, clicking to buy Bitcoin within the banking app they already trust is precisely that path.

Galaxy Digital and its peers are laying the underground pipelines for this very channel.

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