Banks Plug into Crypto Infrastructure as Retail Exchanges Retreat

Bank Leumi, Israel's largest bank, is partnering with Galaxy Digital to offer its 2.5 million retail customers the ability to buy, sell, and hold Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) directly in their own banking app.

The partnership will see Galaxy provide trade execution and custody backend services for Bank Leumi's clients, with launch expected in early 2027. The bank will handle client relationships, KYC, compliance, bank accounts, funding on-ramp, and branding, while Galaxy takes care of trade matching, asset custody, and liquidity access.

This arrangement allows banks to offer crypto services without having to build their own trading infrastructure, a move that's becoming increasingly popular in the industry. Bank Leumi is not alone in this approach, as other major financial institutions such as Bank of New York Mellon (BNY) and Morgan Stanley have also partnered with Galaxy for similar services.

Galaxy's transformation from a crypto investment firm to a crypto infrastructure provider has been rapid, with the company now earning significant revenue from its institutional-facing infrastructure. The trend is expected to continue, with banks opting to 'rent' existing infrastructure rather than build their own, due to the high costs and compliance risks associated with it.

For Coinbase, this trend poses a challenge as it needs to balance helping banks build crypto trading capabilities while protecting its own retail user base. However, Galaxy's core revenue is increasingly dependent on institutional infrastructure, allowing it to serve banks without hesitation.