Institutional investors are no longer only betting on the ‘number go up’ strategy for crypto anymore, they are shifting to hunt for fixed sources of income from large digital assets.
Many institutions already have bitcoin and ether (ETH) on their balance sheets. While holding these assets for the long-term price appreciation, investors are increasingly looking to put them to work to earn income while they wait, said Brett Tejpaul, Coinbase’s ( COIN ) head of institutional, 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 bitcoin, with target returns in the mid-single digits depending on market conditions.
The push for yield isn’t limited to just crypto-native companies.
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 to secure the network. The product signals that the demand for return-bearing crypto strategies is spreading beyond 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 returns. With many options and return-generating strategies now available in the digital asset sector, traditional investors are seeking similar products in crypto, especially as lawmakers set clearer rules for the sector.
Read More: Regulation, Derivatives Helping Drive TradFi Institutions For 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 the chain, asset managers can make ownership easier to track and transfer, while opening the door to markets around the clock. For institutions that are used to waiting days for settlement, the complaint is practical.
He said that almost half of the conversations with institutions right now include stablecoins and tokenization, which points to an increase in interest after the recent regulatory movement in the US. Major financial firms are exploring how to use blockchain systems to move money faster and at lower costs, especially across borders.
This interest is gaining momentum as politicians 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 give institutions more confidence to commit capital and build products linked to blockchain-based systems.
The appeal is straightforward. Tokenization allows traditional assets such as bonds, funds and private credit to be represented on the chain, enabling faster movement and faster settlement. Stablecoins, often tied to fiat currencies, offer a way to move value globally at low cost without relying on legacy payment rails.
Some of the biggest 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 has also brought tokenized money market funds on 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 the foundation for the next phase of financial markets.
This is directly linked to what Tejpaul called the ‘second wave’ of institutional money going into crypto. The first wave of institutional money came from hedge funds, endowments and wealthy investors seeking exposure or arbitrage. But the next group looks different. That includes banks and payment companies that build products on top of crypto rails.
That shift is closely linked to the dividend. Stablecoins, often backed by short-term government debt, can produce income streams similar to traditional cash management products. Tokenized funds extend this idea to a wider set of assets.
At the same time, the institutions pay more attention to the market structure. Round-the-clock trading and near-instant settlement are becoming part of the pitch, with the two largest exchanges in the US, the New York Stock Exchange and Nasdaq, soon to bring 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 this 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 lost in the settlement process,” Tejpaul said.
Still, adoption is uneven.
Most institutional capital remains concentrated in a small set of larger tokens with limited appetite for smaller assets following recent market volatility. And large companies tend to move slowly, often taking years to evaluate new technologies.
But the direction is becoming clearer. Institutions no longer only ask how to buy crypto. They ask 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 for more institutional money in the future.
“Suddenly all the dots connect … what was opaque becomes clear,” Tejpaul said.
