Institutional investors aren’t just betting on ‘number go up’ strategy for crypto anymore, they are shifting to hunting for steady sources of income.
Many institutions already hold bitcoin BTC$71,021.58 and ether ($ETH) on their balance sheets. While they are holding these assets for the long-term price appreciation, investors are increasingly seeking to put them to work to earn income while waiting, said Brett Tejpaul, Coinbase’s (COIN) head of institutional, in an interview with CoinDesk, noting that this is how the next phase of institutional money entering the digital asset sector will look.
“The second wave of institutions… is underway. It’s happening.”
That 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 yield through strategies such as selling call options or lending bitcoin, with target returns in the mid-single digits, depending on market conditions.
The push for yield is not limited to just crypto-native firms.
BlackRock, the world’s largest asset manager, has also moved in this direction. The firm recently launched the iShares Staked Ethereum Trust ETF (ETHB), giving investors exposure to rewards generated by helping secure the network. The product signals that demand for yield-bearing crypto strategies is spreading across traditional finance.
This is a similar strategy to what traditional investors call ‘structured products.’ These financial instruments include assets with options that are designed to deliver certain returns or yields. With many options and yield-generating strategies now available in the digital assets sector, traditional investors are seeking similar products in crypto, especially as lawmakers set clearer regulations for the sector.
Read more: Regulation, derivatives helping drive TradFi institutions into crypto
Moving money faster
This “second wave” of institutional money is also focusing on how to use blockchain technology for payments, settlements, cost and transparency.
The structure reflects a broader trend: tokenization. By putting fund shares onchain, asset managers can make ownership easier to track and transfer while opening the door to round-the-clock markets. For institutions used to waiting days for settlement, the appeal is practical.
He said almost half the conversations with institutions right now include stablecoins and tokenization, pointing to a surge in interest following recent regulatory movement in the U.S. Large financial firms are exploring how to use blockchain systems to move money faster and at lower cost, especially across borders.
That interest is gaining momentum as policymakers move 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 are giving institutions more confidence to commit capital and build products tied to blockchain-based systems.
The appeal is straightforward. Tokenization allows traditional assets such as bonds, funds, and private credit to be represented onchain, enabling faster movement and quicker settlement. Stablecoins, often pegged to fiat currencies, offer a way to move value globally at low cost without relying on legacy payment rails.
Some of the largest firms in traditional finance are already moving in this direction. BlackRock has launched a tokenized Treasury fund, while JPMorgan has tested tokenized deposits and blockchain-based payments. Franklin Templeton has also brought tokenized money market funds onchain, signaling growing comfort with the model among asset managers.
As a result, both traditional financial institutions and crypto-native firms are racing to build or integrate stablecoin infrastructure, seeing it as a foundation for the next phase of financial markets.
This is directly tied 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 payments firms building products on top of crypto rails.
That shift ties closely to yield. Stablecoins, often backed by short-term government debt, can produce income streams that resemble traditional cash management products. Tokenized funds extend that idea to a wider set of assets.
At the same time, institutions are paying closer attention to market structure. Around-the-clock trading and near-instant settlement are becoming part of the pitch, with the two largest stock exchanges in the U.S., the New York Stock Exchange and Nasdaq, soon bringing 24/7 trading to their clients. 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 lowering costs.
“People want to know where their capital is at all times, and they don’t want it to be in transit or be lost in the settlement process,” Tejpaul said.
Still, 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 firms tend to move slowly, often taking years to evaluate new technologies.
But the direction is becoming clearer. Institutions are no longer asking only how to buy crypto. They are asking what it can do for their portfolios and their businesses. And with more regulations coming to clear that path, it will likely open the door to more institutional money in the future.
“All of a sudden, all the dots are connecting… what was opaque is becoming clear,” Tejpaul said.
