Institutional investors are no longer just betting on “digital up” strategies for cryptocurrencies, they are turning to looking for stable sources of income.
Many institutions already hold Bitcoin and Ethereum (ETH) appear on their balance sheets. Brett Tejpaul, head of institutions at Coinbase (COIN), told CoinDesk that while they hold these assets for long-term price appreciation, investors are increasingly looking to leverage these assets to earn income while they wait, noting that this is the next phase of institutional money entering the digital asset space.
“The second institutional wave… is underway. It’s happening.”
This shift 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 tokenized share class of the Bitcoin Income Fund on Base. The fund aims to generate income through strategies such as selling call options or lending Bitcoin, targeting returns in the mid-single digits, depending on market conditions.
The push for yields isn’t 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), allowing investors to earn rewards for helping secure the network. The product demonstrates that demand for yield-generating cryptocurrency strategies is spreading across traditional finance.
This is similar to what traditional investors call “structured products.” These financial instruments include assets with options designed to provide a certain return or yield. With so many options and income-generating strategies now available in the digital asset space, traditional investors are seeking similar products in the cryptocurrency space, especially as lawmakers create clearer regulations for the industry.
Read more: Regulation, derivatives help push TradFi institution into crypto space
Move funds faster
This “second wave” of institutional funding also focuses on how blockchain technology can be leveraged for payments, settlement, cost and transparency.
The structure reflects a broader trend: tokenization. By putting fund shares on the blockchain, asset managers can make ownership easier to track and transfer, while opening the door to around-the-clock markets. For institutions accustomed to waiting days for settlement, the call is practical.
He said that almost half of current conversations with institutions involve stablecoins and tokenization, noting that interest has surged with recent regulatory actions in the United States. Large financial companies are exploring how to use blockchain systems to move funds faster and at lower costs, especially across borders.
That interest is growing as policymakers begin to craft clearer rules. The passage of the GENIUS Act has already provided a framework for stablecoins, and the proposed CLARITY Act is expected to further define how digital assets and tokenized products are issued and traded. Together, they give institutions more confidence to invest capital and build products related to blockchain-based systems.
Appealing is simple. Tokenization allows traditional assets such as bonds, funds, and private credit to be represented on-chain, allowing for faster liquidity and faster settlement. Stablecoins are typically pegged to fiat currencies, providing a way to move value around the world at low cost without relying on traditional payment rails.
Some of the largest companies 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 is also bringing tokenized money market funds on-chain, a sign that asset managers are increasingly comfortable with the model.
As a result, both traditional financial institutions and cryptocurrency-native companies are racing to build or integrate stablecoin infrastructure, viewing it as the foundation for the next phase of financial markets.
This is directly related to what Tejpaul calls the “second wave” of institutional money entering cryptocurrencies. The first wave of institutional money came from hedge funds, endowments and wealthy investors seeking exposure or arbitrage. But the next group looks different. It includes banks and payments companies building products on top of cryptocurrency rails.
This shift is closely tied to yields. Stablecoins are typically backed by short-term government debt and can generate revenue streams similar to traditional cash management products. Tokenized funds extend this idea to a wider range of assets.
At the same time, institutions are paying more attention to market structure. Around-the-clock trading and near-instant settlement are becoming part of the hype, with the two largest U.S. stock exchanges – the New York Stock Exchange and Nasdaq – soon offering 24/7 trading services to their clients. In traditional markets, trades can take days to settle, leaving funds 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 money is at all times, and they don’t want it to get lost in transit or during the settlement process,” Tejpaul said.
Still, adoption rates remain mixed.
Most institutional capital remains concentrated in a small group of major coins, with limited interest in smaller assets following recent market volatility. Large companies tend to move slowly, often taking years to evaluate new technologies.
But the direction is becoming clearer. Institutions no longer just ask how to buy cryptocurrencies. They ask what this can do for their portfolios and businesses. As more regulations are introduced, the door may open to more institutional funding in the future.
“Suddenly, all the dots connected… things that were opaque became clear,” Tejepaul said.
