Is crypto quietly recentralizing? This is one question that I always ask myself on a daily basis. Crypto’s original mandate was very simple; it would allow no one to gatekeep the blockchain! However, in 2025, it seems like that decentralization power of crypto is scattering again. We now have custodians, mining pools, staking leaders and several compliance checkpoints. This is not the only thing, some decentralized finance (DeFi) require KYC. The audacity of having decentralized in the industry name but you still need KYC does not scream DeFi to me. To me it seems like the governments and institutions are sneaking into the crypto world disguised as innovation in a bid to recentralize financial systems.
Yes, this is a rather controversial take but let me lay it out for you and then you can decide if crypto is still decentralized or if its slowly recentralizing?
Large chunk of coins has been moved int a few institutional vaults
Yes, this is not a lie at all. The same centralized institutions that we were trying to run away from, created spot ETFs and they moved a large chunk of coins into their vaults. Just to mention a few, BlackRock’s iShares Bitcoin Trust alone is nearing $100 billion in cryptocurrencies. It has also become a massive single holder of Bitcoin. Now, if you are a crypto pro, you wouldn’t need a witch doctor to know that they can crash the market if they want. They can also manipulate bitcoin prices if they want, they could just sell a lot of BTC at the top and wait for the market to crash before buying back. This is typical whale behavior.
As if this is not enough, many bitcoin spot ETFs in the U.S. rely on the same custodian which is Coinbase. Now, this is what I would like to call, concentrated risks. If by any means something nasty happens to Coinbase billions of dollars would be at risk.
Also, in 2024, Ether spot ETFs began trading and this channeled more crypto coins into centralized systems. Whiles ETF products help in expanding access to crypto products, they also centralize storage and influence of cryptocurrencies. And this proves my point that crypto may be slowly recentralizing under the guise of innovative products.
Crypto mining power has been consolidated in a few pools
The security of cryptocurrencies like Bitcoin is diversified across miners. However, miners largely coordinate through mining pools. Now this also concentrates the security risks as miners pool together instead of mining individually. For example, as of 2025, Foundry USA and Antpool together often account for more than half of blocks mined. The top 5 mining pools also account for the majority of the mined blocks. Mining pools shrink the number of decision makers who could coordinate policy or be pressured. This means that if authorities put too much pressure on the miners, they can just agree to stop mining and all hell would break loose on the financial markets.
The layer 2 issues
Most popular Ethereum layer 2s still use centralized sequencers and upgrade keys however they are faster and cheaper than layer 1s.
Coinbase’s Base has even drawn scrutiny over fee flows and operator controls, even as supporters emphasize that it is non-custodial. Base itself is not decentralized at all as it is controlled by Coinbase. If you take a look, the Base wallet and infrastructure is not available in certain jurisdictions that are restricted. How, can a decentralized wallet be restricted in certain jurisdictions? It is entities like Coinbase that are sneaking centralization back into cryptocurrencies. If Coinbase cannot be trusted with complete decentralization then why should we trust the Base network?
Optimism made real progress in 2024 by shipping “stage 1” fault proofs. However, even with this credibly neutral sequencing remains work in progress across all layer 2 blockchain networks.
Stablecoins are not decentralized
Stablecoins are very convenient and do not easily devalue. This gives the characteristics of cryptocurrencies but the stability of fiat currencies. But are they fully decentralized like other cryptocurrencies? The answer is no, they are not fully decentralized. By default, stable coins may blacklist addresses.
For example, after OFAC sanctioned Tornado Cash in 2022, Circle froze USDC addresses. This is a stark reminder that issuers of stable coins can and they do enforce policy at contract level. This just means you do not completely own that USDC, it belongs to Circle and if they feel like it, they can just freeze you address.
Now, we all know that what Circle did in 2022 is a characteristic of how banks work. A characteristic of how regulated money works, this means stablecoin rails are not permissionless like other cryptocurrencies. In short, to me if you hold USDC or any other stablecoins and you tell me you are into crypto, I will just tell you that you are not into crypto!
Governments are trying to recentralize cryptocurrencies
The whole idea of cryptocurrencies started as a taboo to governments and they hated it. Initially many authorities tried to ban the use of cryptocurrencies. Some of these bans still exist in many African countries even today. Unfortunately, most African leaders are so stuck on old values and 1700s mentality that they cannot quickly catch on to the world’s current situation. That’s why many countries all over the world are trying to gain control in crypto while old madalas in African governments stick to the no cryptocurrency in this country mantra. Sorry, for the vent but I hate it when people remain stuck with old ideologies.
Several governments and authorities are doing their all to bring centralization to cryptocurrencies. The governments are biting crypto companies and tightening their control them. And if any entity breaches the rules, they enforce the rules ruthlessly. IN 2024 CZ the founder of Binance was given a 4-month sentence in the U.S. This signaled that anyone who breaches the rules set by authorities will be held accountable.
In Europe, MiCA has set specific rules for stable coins which began applying on 30 June 2024. Regulators then started pushing for the delisting of non-compliant stablecoins. This tightened control on stablecoins but it is justified by authorities as adding clarity for consumers.
In 2025, the U.S. congress passed a law which was signed by Donald Trump called the Genius Act. This was to become the first stablecoin law of the U.S. It mandates that entities must have 1 as to 1 reserve and they must also be audited. While this development is good for stable coin safety, it also centralizes stable coins.
Privacy tools facing legal headwinds
The U.S. sanctioned tornado cash in 2022; in 2024 a Dutch court convicted a developer by the name of Alexey Pertsev of money laundering. So, the thing is that centralized institutions crave control, so they set rules and if you breach a rule even by a bit, they will come down heavily on you. You will then be forced to play by their rules. This applies to developers, founders, platforms and crypto organisations. And everything becomes centralized.
Final thoughts and conclusion
Yes, we can keep selling the crypto idea as decentralised but the truth is catching up with us. While the regulators cannot do anything about the blockchain revolution; anything identified as decentralised can still be controlled by cracking on Centralised Exchanges, Decentralised exchanges, founders, developes and the infrastructure used.
While the decentralization concepts of crypto is not doomed completely, demands for consumer safety and regulatory control pulls crypto into familiar institutions and legal protections. This means that the whole crypto ecosystem cannot be fully decentralised as some layers will always be controlled. The other thing is that builders and developers may innovate and sneak centralization into cryptocurrencies as a way of pushing client diversity and adoption.
I believe that we should insist on decentralization when it matters. The truth is crypto is no longer be fully decentralized as certain levels of recentralization sneak in across the ecosystem. What do you all think? After all this is just a personal view!
Resources
Financial Times on IBIT’s AUM and concentration:
https://www.ft.com/content/0cc91622-e076-4005-bb0c-93281123567c
CNBC on Coinbase custodying 8 of 11 spot BTC ETFs:
The Block recap (Coinbase statement) on ETF approvals and partnerships:
https://www.theblock.co/post/271778/coinbase-calls-spot-bitcoin-etf-approval-watershed-moment
Reuters on U.S. spot Ether ETFs beginning July 23, 2024:
Hashrate Index: top Bitcoin mining pools in 2025:
https://hashrateindex.com/blog/top-10-bitcoin-mining-pools-of-2025/
Miner Mag on U.S. share of hashrate:
https://theminermag.com/news/2025-01-02/us-bitcoin-hashrate-dominance
Cointelegraph on Lido share around 25% of staked ETH (with Dune data):
https://cointelegraph.com/news/ethereum-staked-supply-hits-record
The Block on OFAC‑compliant blocks falling and relay diversity:
Flashbots transparency discussion on relay share trends:
EU MiCA timeline and application (EUR‑Lex and ESMA/EU Commission):
https://eur-lex.europa.eu/EN/legal-content/summary/european-crypto-assets-regulation-mica.html
Reuters on Coinbase delisting some stablecoins in Europe under MiCA:
Deloitte DART on the SEC rescinding SAB 121 (SAB 122):
Reuters on U.S. Bancorp reviving crypto custody; Citi exploring services:
U.S. Treasury press release sanctioning Tornado Cash (OFAC):
https://home.treasury.gov/news/press-releases/jy0916
WIRED on the Dutch conviction of Tornado Cash developer Alexey Pertsev:
https://www.wired.com/story/tornado-cash-developer-found-guilty-of-laundering-crypto
Reuters on the GENIUS Act becoming U.S. law (stablecoin framework):
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