Institutional investors are no longer just betting on the “numbers increase” strategy for cryptocurrencies, but are turning to looking for stable sources of income.
Many institutions already own bitcoins and ether (ETH) on their balances. While they hold these assets for long-term price appreciation, investors are increasingly looking to put them to work for income while they wait, Brett Tejpaul, head of institutional at Coinbase (COIN), said in an interview with CoinDesk, noting that this is what the next phase of institutional money entering the digital asset sector will look like.
“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 returns through strategies such as selling call options or lending bitcoins, with target returns in the mid-single digits, depending on market conditions.
The drive for performance is not just limited to crypto-native companies.
BlackRock, the world’s largest asset manager, has also moved in this direction. The company recently launched the iShares Staked Ethereum Trust ETF (ETHB), which gives investors exposure to rewards generated by helping to secure the network. The product indicates that the demand for profitable crypto strategies is spreading to 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 generate certain returns or yields. With many options and yield-generating strategies now available in the digital asset sector, traditional investors are looking for similar products in crypto, especially as lawmakers establish clearer regulations for the sector.
Read more: Regulation and derivatives helping drive TradFi institutions into cryptocurrencies
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 make ownership easier to track and transfer, while opening the door to 24-hour markets. For institutions accustomed to waiting days for settlement, the resource is practical.
He said nearly half of conversations with institutions right now include stablecoins and tokenization, pointing to a surge in interest following the recent regulatory move in the U.S. Large financial companies are exploring how to use blockchain systems to move money faster and at lower cost, especially across borders.
That interest is gaining momentum as authorities take steps to establish clearer rules. The passage of the GENIUS Act has already provided a framework for stablecoins, while the proposed CLARITY Act is expected to better define how digital assets and tokenized products can be issued and traded. Together, they are giving institutions more confidence to commit capital and create products tied to blockchain-based systems.
The appeal is simple. Tokenization allows traditional assets such as bonds, funds, and private credit to be represented on-chain, allowing for faster movement and settlement. Stablecoins, often pegged to fiat currencies, offer a way to move value globally at low cost without relying on legacy payment pathways.
Some of the largest 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 onto the chain, signaling 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 a foundation for the next phase of financial markets.
This is directly related to what Tejpaul called 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 seems different. It includes banks and payment companies that build products on crypto rails.
That change is closely related to performance. Stablecoins, often backed by short-term government debt, can generate income streams that resemble traditional cash management products. Tokenized funds expand that 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 are becoming part of the trend, and the two largest stock exchanges in the US, the New York Stock Exchange and the Nasdaq, will soon offer 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 reducing costs.
“People want to know where their capital is at all times and don’t want it to be in transit or lost in the liquidation 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 companies tend to move slowly, often taking years to evaluate new technologies.
But the direction is increasingly clear. Institutions are no longer just asking how to buy cryptocurrencies. They wonder what it can do for their wallets and their businesses. And with more regulations to clear that path, it will likely open the door to more institutional money in the future.
“Suddenly all the dots connect…what was opaque becomes clear,” Tejpaul said.
