Nikolas Sargeant
A new generation of cryptocurrency-focused asset management firms has dramatically expanded their blockchain-based investments, growing onchain capital deployment from approximately $1 billion to over $4 billion since January 2025. This explosive growth reflects institutional confidence in decentralized finance protocols as viable infrastructure for traditional financial services.
According to a comprehensive report from analytics platform Artemis and DeFi yield platform Vaults released Wednesday, crypto-native asset managers are "quietly deploying capital across a diverse range of opportunities" within the decentralized finance ecosystem. The most notable example includes nearly $2 billion locked in Morpho Protocol, a leading decentralized lending and borrowing platform.
This institutional capital surge coincides with the Trump administration's crypto deregulation efforts, which have provided regulatory clarity that enables institutions to engage with DeFi protocols without fear of enforcement action. The supportive regulatory environment has unlocked previously cautious institutional capital seeking higher yields and operational efficiencies.
The emergence of this "new class of crypto-native asset managers" represents a fundamental shift in institutional approaches to blockchain technology, moving beyond speculative investments toward strategic infrastructure deployment that enhances operational capabilities and generates sustainable returns.
DeFi Transforms Into Essential Institutional Infrastructure
Traditional financial institutions are increasingly recognizing decentralized finance as complementary infrastructure rather than disruptive competition, according to the Artemis-Vaults analysis. This paradigm shift reflects DeFi protocol maturation and institutional comfort with blockchain-based financial services.
"As DeFi infrastructure matures, institutional sentiment is moving towards seeing DeFi as a complementary, configurable financial layer not merely a disruptive, ungoverned space," the researchers noted. Financial technology companies, cryptocurrency wallets, and exchanges are integrating DeFi tools as "invisible back-end infrastructure" that powers consumer-facing applications.
This integration strategy allows platforms to abstract DeFi's technical complexity while embedding yield generation directly into user experiences. The approach enhances customer retention, creates new revenue streams, and improves capital efficiency without requiring users to understand underlying blockchain mechanics.
Major platforms exemplify this trend through seamless DeFi integration. Coinbase offers yield on USDC deposits while PayPal provides similar returns on PayPal USD stablecoin holdings, both leveraging decentralized protocols to generate competitive yields for mainstream consumers.
Three Core Use Cases Drive Institutional DeFi Adoption
The report identifies three primary institutional DeFi applications: stablecoin yield generation, cryptocurrency yield products, and crypto borrowing services that "abstract away DeFi complexity" for end users. These services represent the practical implementation of what researchers term the "DeFi Mullet" approach—maintaining traditional fintech user interfaces while utilizing decentralized protocols for back-end operations.
Stablecoin yield offerings have become particularly popular among institutions seeking low-risk returns on dollar-denominated digital assets. These products allow companies to offer competitive yields on stable value tokens while maintaining regulatory compliance and user familiarity with traditional banking concepts.
Cryptocurrency borrowing and lending services demonstrate sophisticated DeFi integration, with platforms like Coinbase's crypto loan service utilizing Morpho Protocol infrastructure while presenting simplified interfaces to borrowers. This approach combines DeFi efficiency with traditional financial service user expectations.
User experience quality increasingly determines DeFi protocol success in institutional contexts. The report emphasizes that platforms focusing on reliability, predictability, and streamlined interactions achieve better capital retention than those prioritizing technical complexity over usability.
Institutions evaluate DeFi protocols based on factors including gasless transaction capabilities, transparent operations, and consistent performance that supports business-critical applications requiring institutional-grade reliability and regulatory compliance standards.
