Most people looking to trade large quantities of crypto have most of their wealth in other assets and expect to be able to convert between them, with the dollar as the default go-between.
This is true of practically every traded asset, including FX. It’s not true of e.g. MGM tokens. But that disparity highlights the difference between crypto and other traded assets.
Also, the fact that people currently use USD as "the default go-between" does not mean that people have to keep using it. Crypto OTC desks already exist.
OTC desks are the correct answer, not “why would you want to” use a dollar. Yes, in a hypothetical world people wouldn’t use dollars as a go between, but instead use [insert theme of the decade]. In reality, we do and will for the foreseeable future.
Also, a crypto OTC desk that doesn’t ask for KYC is by almost every country’s law laundering money. So it doesn’t sidestep the core issue of this post.
If the idea is, like you said, just about being able to convert between different asset classes, we could have OTC desks that would be taking crypto and (after following proper KYC/AML regulations) giving you any of stock/bonds/real estate titles/commodities/etc, and vice-versa, without any need of USD as intermediary.
- Because every USD <-> local currency may have processing fees (credit cards on retail, withdrawal fees for large FX traders)
- Because some banks use the opportunity to slap tons of other fees
By holding crypto, one can legally avoid all of these costs.
It’s almost exactly the use case you want for an exchange (or really in fx a consumer liquidity platform as they aren’t really traditional exchanges).
Is that different in the crypto world? If so why? All of the costs (ie risk management) seem more expensive in crypto than fiat.