Institutional investors are no longer just betting on crypto “the numbers will go up” strategy, but have shifted to looking for stable sources of income.
Many institutions already own Bitcoin BTC$71,021.58 and ether ($ETH) listed on the balance sheet. In an interview with CoinDesk, Coinbase (COIN) Head of Institutional Brett Tejpole said in an interview with CoinDesk that investors are holding onto these assets for long-term price appreciation, but are increasingly looking to leverage those assets to generate income while they wait, and that this will be the next phase of institutional money entering the digital asset sector.
“A second wave of institutions…is underway. It’s happening.”
This change is shaping a new wave of products, he said. Coinbase last week partnered with $3.5 trillion fund services provider Apex Group to launch a Bitcoin Yield Fund tokenized share class on Base. The fund aims to generate yield through strategies such as selling call options and lending Bitcoin, with targeted returns in the mid-single digits depending on market conditions.
The search for yield is not limited to crypto-native companies.
BlackRock, the world’s largest asset manager, is also moving in this direction. The company recently launched the iShares Staked Ethereum Trust ETF (ETHB) to reward investors for helping secure the network. This product demonstrates the growing demand for yield-producing crypto strategies across traditional finance.
This is a similar strategy to what traditional investors refer to as “structured products.” These financial instruments include assets with options designed to provide a specific return or yield. With many options and yield-generating strategies now available in the digital asset sector, traditional investors are seeking similar products for cryptocurrencies, especially as lawmakers create clearer regulations for the sector.
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move money faster
This “second wave” of institutional money is also focused on how blockchain technology can be used for payments, settlement, costs, and transparency.
This structure reflects a broader trend: tokenization. By placing fund shares on-chain, asset managers can easily track and transfer ownership while opening the door to a 24-hour market. For financial institutions accustomed to waiting days for payments, this appeal becomes a reality.
He said nearly half of conversations with financial institutions now include stablecoins and tokenization, noting that interest has increased following recent regulatory moves in the United States, and that large financial companies are exploring ways to use blockchain systems to move funds faster and at lower cost, especially across borders.
That interest is growing as policymakers seek to set clearer rules. While the passage of the GENIUS Act already provides a framework for stablecoins, the proposed CLARITY Act is expected to further define how digital assets and tokenized products can be issued and traded. Together, these will allow institutions to more confidently deploy capital and build products tied to blockchain-based systems.
The appeal is simple and clear. Tokenization allows traditional assets such as bonds, funds, and private credit to be represented on-chain, allowing for faster movement and faster settlement. Stablecoins are often pegged to fiat currencies and provide a low-cost way to move value around the world without relying on traditional payment rails.
Some of the biggest players in traditional finance are already moving in this direction. BlackRock launched a tokenized Treasury fund, and JPMorgan tested tokenized deposits and blockchain-based payments. Franklin Templeton has also brought tokenized money market funds on-chain, demonstrating growing comfort with the model among asset managers.
As a result, both traditional financial institutions and crypto-native companies are racing to build or integrate stablecoin infrastructure, seeing it as the foundation for the next stage of financial markets.
This is directly related to what Tejpor called the “second wave” of institutional money into cryptocurrencies. The first wave of institutional money came from hedge funds, endowments, and wealthy investors seeking exposure and arbitrage. However, the situation is different for the next group. This also includes banks and payment companies that build products on top of crypto rails.
This change is closely related to yield. Stablecoins are often backed by short-term government debt and can generate income streams similar to traditional cash management products. Tokenized funds extend that idea to a wider range of assets.
At the same time, financial institutions are paying close attention to market structure. At the two largest stock exchanges in the United States, the New York Stock Exchange and Nasdaq, 24-hour trading and near-instant settlement are becoming part of the market, and will soon offer customers 24/7 trading. In traditional markets, trades can take days to settle, leaving capital tied up and exposed to counterparty risk.
Blockchain-based systems aim to reduce that friction, thereby increasing transparency and reducing costs.
“People always want to know where their capital is, and they don’t want it to get lost in transit or in the payment process,” Tejpor said.
Still, recruitment varies.
Following recent market volatility, most institutional capital remains concentrated in a few major tokens, with limited demand for smaller assets. Large companies also tend to move slowly, often taking years to evaluate new technologies.
However, the direction is becoming clearer. Institutions are no longer just looking for a way to buy cryptocurrencies. They are asking what it can do for their portfolio and business. And more regulation to pave the way could open the door to even more institutional capital in the future.
“Suddenly all the dots started connecting…what had been opaque is becoming clear,” Tejpor said.
