Written by: Little Cake

On August 14, Israel's largest bank, Bank Leumi, announced a partnership with Galaxy Digital to allow 2.5 million retail customers to buy, sell, and hold BTC, ETH, and SOL directly in the bank's own Leumi Trade application. Galaxy provides trade execution and custody backend, with plans to launch in early 2027.

When banks start stuffing crypto trading into their own apps, exchanges begin to transform from "user-facing brands" into "hidden pipelines behind banks."

Trading happens in bank apps, but banks do nothing

First, let's look at the division of responsibilities in this partnership.

Bank Leumi is responsible for customer relations, KYC, compliance, bank accounts, funding access, and most importantly—branding. Customers open Leumi Trade, see the bank's logo, and trust the financial institution that has existed for 120 years.

Galaxy is responsible for trade matching (through the GalaxyOne Institutional platform), asset custody (via its subsidiary GK8), and liquidity access. Every buy and sell by users is actually completed within Galaxy’s system.

The role of Bank Leumi in this partnership is more akin to that of a licensed distribution channel than a trading service provider. The bank has not built its own trading engine, has not set up a custody system, and has not connected to liquidity pools. What it does is wrap Galaxy’s capabilities in its own shell and put it into the app that 2.5 million customers open daily.

For banks, this is the most rational choice. The cost of building crypto trading infrastructure is high, the timeline is long, and the compliance risks are significant. By accessing Galaxy, it’s essentially utilizing a complete set of regulated trading and custody capabilities through an API, focusing instead on what it does best: managing customer relationships and funding channels.

Galaxy's 2026: From trading company to financial pipeline

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

At the beginning of August, BNY Mellon announced a partnership with Galaxy to integrate Galaxy's staking infrastructure into BNY's digital asset custody platform, allowing institutional clients to participate in PoS network staking without leaving BNY's custody framework. BNY manages $62.6 trillion in assets, making it the largest custody bank in the world.

In June, Morgan Stanley's wealth management division selected Galaxy as its staking service provider, offering qualified high-net-worth clients staking yields for BTC, ETH, and SOL. Galaxy is also the node operator for BlackRock's FETH Ethereum staking ETF.

Along with Bank Leumi, Galaxy secured three key nodes in the global financial system in the summer of 2026: the largest custody bank, one of the largest wealth management platforms, and the entire retail crypto business of a regional leading bank. Galaxy itself reported an institutional contract pipeline of $30 billion.

When Mike Novogratz founded Galaxy in 2018, it was positioned as a crypto investment company, buying coins, making markets, and investing in projects. In 2026, Galaxy is evolving into a crypto infrastructure supplier for traditional financial institutions, providing trading, custody, staking, and compliance services, selling them to banks and asset management companies while stepping back into the background.

This transformation has a clear commercial logic: Crypto trading aimed at retail users is a red ocean, with profit margins driven down by Coinbase, Robinhood, and various local exchanges. However, infrastructure aimed at institutions is a blue ocean, as banks are willing to pay a premium for compliance, security, and integration capabilities, and once connected, the switching costs are extremely high.

Lessons from the payment industry

This evolutionary path is not the first time this has occurred in financial history.

Your credit card carries the logo of China Merchants Bank or Chase, but every swipe transaction's clearing and settlement happens behind the scenes via Visa or Mastercard. Consumers recognize the bank, not the clearing network. Banks hold customer relationships and deposits, while clearing networks possess transaction processing capabilities and global interconnectivity. Each serves its needs.

Crypto trading is heading toward the same structure. Bank Leumi's customers buy Bitcoin in Leumi Trade, unaware of or needing to know Galaxy's existence. Just as you wouldn't think of Visa when purchasing coffee with your China Merchants credit card.

If this trend continues, the value distribution in the crypto industry will undergo a fundamental restructuring. Banks, which hold user relationships and funding access, will capture brand premiums and customer loyalty; infrastructure companies providing backend trading and custody capabilities (like Galaxy, Coinbase Prime, Fireblocks, etc.) will earn technology service fees, stable but with limited profit margins.

John D'Agostino, head of Coinbase's institutional business, stated in April this year: the options for banks facing crypto business are "buy, build, or rent." He predicts that most banks will choose "rent." Because the crypto market's size remains only 3%-5% compared to the global equity and fixed-income markets, banks lack the incentive to build a complete set of infrastructure themselves.

Coinbase's dilemma

This trend presents a delicate situation for Coinbase.

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

On the other hand, Coinbase simultaneously operates the world's largest retail crypto trading brand. When bank customers can directly buy Bitcoin in their own bank apps, how many reasons do they have to open the Coinbase app?

This represents a classic channel conflict. If Coinbase fully assists banks in building crypto trading capabilities, it is supporting banks in encroaching on its retail user base. If it restricts its technological output to banks, players like Galaxy, Fireblocks, and BitGo will fill the gap.

D'Agostino's response is: the crypto market is still in its early days, the overall pie is expanding, and institutional and retail businesses can grow in parallel. This assertion holds true during market expansion periods. However, once penetration reaches a certain level and growth slows, competition between bank channels and self-operated retail will be inevitable.

Galaxy does not carry this burden. It launched the GalaxyOne platform for individual investors at the end of 2025, but its scale is much smaller than Coinbase's retail business. Galaxy's core revenue increasingly relies on institutional infrastructure, allowing it to serve banks unreservedly because the success of banks is its success.

A quieter crypto industry

Bank Leumi's announcement includes a detail: crypto trading will occur within a "dedicated secure area" in the Leumi Trade app.

This product design choice reveals a lot of information. For banks, crypto is just a new dish on the capital market service menu. It stands alongside stocks, bonds, and funds, constrained by the same compliance frameworks and settled using the same account systems. There are no mnemonic phrases, no gas fees, and no on-chain interactions.

If more banks follow Bank Leumi's path in the next five years, offering crypto trading using Galaxy or Coinbase’s backend in their own apps, the appearance of the crypto industry will undergo an unintuitive change: it will become quieter.

No longer will users need to be educated on what a wallet is, what a private key is, or what on-chain confirmation is. Banks handle all of this for you. Users won’t even need to know that the Bitcoin they buy is held in Galaxy's GK8 cold wallet. They just need to know that this is a service provided by the bank, regulated and as simple as buying a fund.

For industry participants, this is both a victory and a loss.

The victory lies in the fact that crypto assets have finally been embedded into the capillaries of mainstream finance, reaching those ordinary depositors who would never download Coinbase or Binance. What’s lost is the brand recognition and user sovereignty narrative that the crypto industry prides itself on. When Bitcoin becomes a button in a bank app, the vision of "trustless intermediaries" from Satoshi's whitepaper drifts further and further away from reality.

But the market never follows an idealistic script. Money flows to where resistance is minimal. For the 2.5 million customers of Bank Leumi, tapping to buy Bitcoin in an app they already trust is the path of least resistance.

Galaxy and its peers are paving the underground pipeline for this route.