Institutional investors are no longer just betting on a “up the numbers” strategy for crypto, they are turning to finding stable revenue streams from major digital assets.
Many institutions already hold Bitcoin and ether (ETH) on their balance sheets. While they hold these assets for long-term price appreciation, investors are increasingly looking to put them to work to earn income in the meantime, said Brett Tejpaul, institutional head of Coinbase (COIN), in an interview with CoinDesk, noting that this is what the next phase of institutional money entering the digital assets sector will look like.
“The second wave of institutions…is happening. It’s happening.”
This shift is shaping a new wave of products, he said. Coinbase last week launched a tokenized share class of its Bitcoin Yield Fund on Base in partnership with Apex Group, a $3.5 trillion fund services provider. The fund aims to generate return through strategies such as call writing or bitcoin lending, with target returns in the mid-single digits, depending on market conditions.
The search for yield is not limited to crypto-native companies alone.
BlackRock, the world’s largest asset manager, has also moved in this direction. The company recently launched the iShares Staked Ethereum Trust ETF (ETHB), providing investors with exposure to rewards generated by helping secure the network. The product signals that demand for yield-generating crypto strategies is spreading across traditional finance.
This is a strategy similar to what traditional investors call “structured products.” These financial instruments include assets with options designed to generate certain yields or returns. With many options and yield-generating strategies now available in the digital asset sector, traditional investors are seeking similar products in crypto, especially as lawmakers establish clearer regulations for the sector.
Read more: Regulations and derivatives helping TradFi institutions get into crypto
Move money faster
This “second wave” of institutional money also focuses on how to use blockchain technology for payments, settlements, costs and transparency.
The structure reflects a broader trend: tokenization. By putting fund shares on-chain, asset managers can facilitate tracking and transfer of ownership while opening the door to markets 24 hours a day. For institutions accustomed to waiting days for settlement, calling is convenient.
He said that almost half of the conversations with institutions are currently around stablecoins and tokenization, highlighting a surge in interest following recent regulatory movement in the United States. Major financial companies are exploring how to use blockchain systems to move money faster and more cheaply, particularly across borders.
This interest is growing as policymakers strive to set clearer rules. The passage of the GENIUS Act has already provided a framework for stablecoins, while the proposed CLARITY Act is expected to further define how digital assets and tokenized products can be issued and traded. Together, they give institutions more confidence to commit capital and create products linked to blockchain-based systems.
The appeal is simple. Tokenization allows traditional assets such as bonds, funds and private credit to be represented on-chain, enabling faster movement and settlement. Stablecoins, often pegged to fiat currencies, offer a way to move value globally at low cost without relying on traditional payment channels.
Some of the biggest companies in the traditional financial sector are already moving in this direction. BlackRock launched a tokenized Treasury fund, while JPMorgan tested tokenized deposits and blockchain-based payments. Franklin Templeton has also brought tokenized money market funds online, signaling growing comfort with the model among asset managers.
As a result, traditional financial institutions and crypto-native companies are rushing to build or integrate stablecoin infrastructure, seeing it as the foundation for the next phase of financial markets.
This is directly related to what Tejpaul called the “second wave” of institutional money entering crypto. The first wave of institutional money came from hedge funds, endowments, and wealthy investors seeking exposure or arbitrage. But this next group looks different. It includes banks and payment companies that build products on crypto rails.
This change is closely linked to performance. Stablecoins, often backed by short-term government debt, can produce income streams that resemble traditional cash management products. Tokenized funds extend this idea to a broader set of assets.
At the same time, institutions are paying more attention to market structure. Round-the-clock trading and near-instant settlements have become part of the talk, with the two largest exchanges in the United States, the New York Stock Exchange and Nasdaq, soon offering 24/7 trading to their customers. In traditional markets, trades can take days to settle, leaving capital tied up and exposed to counterparty risk.
Blockchain-based systems aim to reduce this friction, thereby increasing transparency and reducing costs.
“People want to know where their capital is at all times, and they don’t want it to be in transit or lost in the settlement process,” Tejpaul said.
Yet adoption is uneven.
Most institutional capital remains concentrated in a small set of major tokens, with limited appetite for smaller assets after recent market volatility. And large companies tend to move slowly, often taking years to evaluate new technologies.
But the direction is becoming clearer. Institutions are no longer just wondering how to buy cryptocurrencies. They are wondering what this can do for their wallets and their businesses. And with more regulations paving this way, it will likely open the door to more institutional money in the future.
“All of a sudden, all the dots connect…what was opaque becomes clear,” Tejpaul said.
