SAN FRANCISCO — Paul Chou was among the many Bitcoin aficionados who thought big Wall Street institutions were about to become heavy hitters in the cryptocurrency markets.
Mr. Chou came from one of those institutions, Goldman Sachs, and created a cryptocurrency exchange, LedgerX, that would cater to big investors with sophisticated financial contracts.
Now, in the wake of last year’s Bitcoin crash, Mr. Chou is being forced to confront how few of the big finance companies acted on their cryptocurrency plans.
“It was definitely part of the original plan that institutions would be a big part of this market,” he said. “We were wrong.”
Goldman Sachs said it was opening a Bitcoin trading operation to serve clients. A year later, customer interest has been weak, and the bank has not received regulatory approval to buy and hold actual Bitcoins for customers, according to a person familiar with the operation, who was not authorized to comment on it publicly and spoke on the condition of anonymity.
The parent company of the New York Stock Exchange has been forced to delay the opening of the cryptocurrency exchange it announced last year, and there is still no clear sign of when it will get the approval needed from regulators. The exchange declined to comment.
And the Chicago Board Options Exchange said last month that it was going to stop offering a Bitcoin trading contract that it started with great fanfare in late 2017.
The faltering efforts among big financial outfits are part of a retrenchment in the cryptocurrency industry after last year’s bust, when the price of a single Bitcoin fell from nearly $20,000 to around $4,000, where it has lingered since December.
Some cryptocurrency enthusiasts had hoped that the entrance of Wall Street institutions would give them legitimacy with traditional investors. But their struggles — and waning interest — illustrate the difficulty in bringing Bitcoin from the fringes of the internet into the mainstream financial world.
“The smart money knows that crypto is not ready,” said Ciaran Murray, a cryptocurrency trader in London.
Mr. Murray tried to set up a hedge fund focused on digital tokens, but he found that when investors dug into the technology they were turned off.
“Once you get into the details, it scared them off,” he said.
Mr. Murray and other cryptocurrency believers are adamant that the problems are not a death blow for Bitcoin and the technology it introduced. Mr. Chou, for example, is retooling LedgerX and applying for regulatory approval to open trading to small retail investors, whose interest in cryptocurrencies has held up a bit more.
And the big companies haven’t entirely walked away. Goldman and the parent company of the New York Stock Exchange, the Intercontinental Exchange, are moving ahead with their cryptocurrency trading operations despite tepid interest from customers. The giant asset manager Fidelity recently began working with a small number of big clients that want to hold cryptocurrencies.
In Silicon Valley, Jack Dorsey, the chief executive of Twitter and the online payments company Square, announced last month that he was looking to hire three or four Bitcoin developers. He compared the technology to the early internet, both in its problems and its potential.
Even in this “crypto winter,” as some are calling it, the depressed price of Bitcoin is still four times higher than it was at a peak in 2013, before an earlier crash.
But few of the more practical ambitions for Bitcoin and other cryptocurrencies have been realized, and it can still be hard to determine what is real and what is not real around digital tokens.
An American company looking to set up Bitcoin investment funds, Bitwise Asset Management, recently said it had determined that 95 percent of the trading activity reported by Bitcoin exchanges around the world was fake.
The structure of Bitcoin makes it hard to maintain control. All Bitcoins are accounted for on a decentralized ledger, known as the blockchain, which no single institution controls. Anyone can have access to it, giving free rein to bad actors.
Regulators have not approved investment products tied to Bitcoin because of the likelihood that prices are being manipulated. But exchanges where investors can bet on the price movement of Bitcoin through futures contracts, without having to hold Bitcoins, have gained approval.
The Chicago Mercantile Exchange, or C.M.E. has introduced a Bitcoin futures contract that has gained moderate traction with traders. Still, the market has been small enough that the C.M.E.’s competitor, the Chicago Board Options Exchange, said recently that it would stop issuing its own Bitcoin futures contract.
Many market watchers have said that for Bitcoin to gain deeper traction with big investors, those investors will have to be able to buy and hold actual Bitcoins.
The Intercontinental Exchange had initially said it hoped to open up its cryptocurrency exchange, Bakkt, last fall, with the ability for investors to end up holding the Bitcoins they bought. Goldman Sachs also said last year that it was hoping to allow its customers to buy and hold Bitcoins.
The Bakkt and Goldman Sachs efforts are still in limbo because of questions from regulators about how the institutions would hold Bitcoins for clients. Bakkt and Goldman Sachs declined to comment on the delays. Bakkt’s difficulties were recently detailed in The Wall Street Journal.
For most traditional investments, like stocks or bonds, there are clearly established methods for securing customer accounts. But the design of Bitcoin means that if a Bitcoin is stolen from a Bitcoin wallet, where the digital tokens are stored, it is hard to get back.
This has already been a big problem for many Bitcoin exchanges that have suffered crippling thefts and losses.
“There is a lot of new ground being covered, and the regulators’ job is to be satisfied, not just to be fast,” said Thomas Chippas, the chief executive of another exchange hoping to cater to big investors, ErisX, which has also been held up by the regulators.
Even if the authorities are able to get comfortable with the security arrangements at Bitcoin exchanges, there is the question of what application Bitcoin and other digital tokens might have outside of speculation.
Many Bitcoin enthusiasts have argued that the original cryptocurrency is useful as a place to store value outside the control of any government or institution, as if it were a digital version of gold. But that narrative has been tested as the value of Bitcoin has bounced around. And other applications for Bitcoin, like using it to pay for things online, have not taken off.
“I think it will be years and years before it will be ready for nonspeculative use cases,” Mr. Murray said. “Until now, it’s just been people buying it and hoping it’s going to go up. I think that’s not going to end for three or four years.”