In today’s “Crypto for Advisors” newsletter, Gregory Mall of Lionsoul Global breaks down the crypto yield, highlighting its maturity along with its role in a portfolio. We look at why dividends may ultimately become crypto’s most durable bridge to mainstream portfolios.
Then, in “Ask an Expert,” Kevin Tam highlights key investments from recent 13F filings, including the news that combined sovereign exposure from the United Arab Emirates reached $1.08 billion, making them the fourth-largest global holder.
Dividends in Digital Assets: What Advisors Should Know as the Market Matures
For most of its history, crypto has been defined by directional bets: buy, hold, and hope the next cycle delivers. But a quieter transformation has been unfolding beneath the surface. As the digital asset ecosystem has matured, one of its most important and misunderstood developments has been the rise of leverage: systematic, programmatic and increasingly institutional.
The story begins with infrastructure. Bitcoin introduced self-sufficiency and scarcity; Ethereum extended this foundation with smart contracts, making blockchains programmable platforms capable of running financial services. Over the past five years, this architecture has given rise to a parallel, transparent credit and trading ecosystem known as decentralized finance (DeFi). Although still niche compared to traditional markets, DeFi has grown from under $1 million of total value locked in 2018 to well over $100 billion at the top (DefiLlama). Even after the 2022 downturn, activity has picked up sharply.
For advisors, this expansion is important because it has unlocked something crypto rarely offered in its early years: cash flow-based returns that don’t rely on speculation. But the complexities behind these yields and the risks beneath the surface require careful navigation.
Where the crypto dividend comes from
Dividends in digital assets do not come from a single source, but from three broad categories of market activity.
1. Trading and liquidity supply
Automated Market Makers (AMMs) generate fees when users exchange tokens. Liquidity providers earn a share of these fees, similar to market-making spreads in traditional finance. On a large scale and in sufficiently deep pools, this can create a stable income – although exposure to “infinite losses” needs to be monitored.
2. Lending and interest markets with security
On-chain protocols allow users to borrow against their assets without intermediaries. Borrowers pay interest; lenders earn it. These dynamics create opportunities for interest rate arbitrage (borrowing at one rate, lending at another) and for delta-neutral return strategies when hedging exposures.
3. Derivative financing, volatility and liquidations
Perpetual swap markets generate funding rates that can be captured through market neutral positioning. Similarly, option boxes and structured payouts can systematically profit from volatility. Liquidation auctions, where collateral from subsecured loans are sold, also provide opportunities for sophisticated participants.
It is important that these are not “magical” yields. They arise from economic activity: trading, leveraged demand and liquidity inflows.
Risks beneath the surface
Despite its promise, DeFi is far from plug-and-play for fiduciaries.
Technical risk remains the most visible. Exploitation of smart contracts, oracle manipulation and bridge hacks have together accounted for billions in losses. The Ronin Bridge compromise, for example, resulted in one of the biggest thefts in crypto history.
Regulatory complexity is just as great. Most DeFi platforms operate with limited or no know-your-customer processes or other anti-money laundering (AML) or sanctions safeguards, making them inaccessible or inappropriate for many wealth management clients.
And perhaps most overlooked: financial risk. Many DeFi yields remain subsidized by token issuance – attractive but structurally unsustainable. The saying goes: If you don’t understand where the yield comes from, you are the yield.
What advisers should think about
1. Demand shifts from directional exposure to income.
As the asset class matures, many clients want participation without taking high beta.
2. Not all dividends are equal.
Token-incentivized returns and financially-based returns are fundamentally different.
3. Operational due diligence is everything.
Smart contracts can be executed independently, but the surrounding infrastructure – storage, valuation, compliance, auditing – is what makes strategies investable for high-net worth (HNW) and institutional clients.
4. Dividends may eventually become crypto’s bridge to mainstream portfolios.
In the same way that money markets underpin traditional finance, transparent and programmatic return mechanisms may become crypto’s most durable institutional feature.
If you want to read more about dividend generation DeFi, visit us for continued reading.
– Gregory Mall, Chief Investment Officer, Lionsoul Global
Ask an expert
Q: How is Canada’s largest globally systemically important bank investing in bitcoin?
ONE: Royal Bank of Canada increased its bitcoin exchange-traded product (ETP) position from 35,000 to 1.47 million shares, an increase of 4,104 percent, while dollar exposure increased to $102 million, representing an increase of 4,363 percent. In addition, RBC increased its strategy (MSTR) equity position by 561 percent, taking dollar exposure to $504 million, making it one of the largest Canadian bank bitcoin proxy positions.
Q: In addition to exchange-traded funds (ETFs), how do Canadian institutions interact with other digital assets?
ONE: Canada Pension Plan Investment Board (CPPIB) added 393,322 shares in Strategy (MSTR), worth $127 million. This marks a milestone as the first major Canadian pension fund to gain bitcoin exposure indirectly through MSTR.
Q: What are notable developments in Q3 2025?
ONE: Harvard University’s endowment significantly expanded its iShares Bitcoin Trust position in Q3 2025, rising from 1.91 million shares to 6.81 million — an increase of 258 percent, equivalent to $443 million.
Total sovereign exposure in the United Arab Emirates hit $1.08 billion. This is the fourth largest global holder after US institutions. Al Warda Investment RSC Ltd. significantly expanded its iShares Bitcoin Trust by 230 percent to 7.96 million shares, totaling $518 million. Mubadala Investment Corporation added a new position worth $567 million.
Looking ahead, expected rate cuts and maturing ETP infrastructure mark the final transition of bitcoin from speculative asset to institutional reserve component. The combination of legislative clarity, proliferation of government funds, and grant participation forms the basis for sustained institutional adoption.
Sources: SEC filings, Nasdaq, FactSet.
– Kevin Tam, digital asset research specialist
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Information presented, displayed or otherwise provided is for educational purposes only and should not be construed as investment, legal or tax advice or an offer to sell or a solicitation of an offer to buy interests in a fund or other investment product. Access to products and services of Lionsoul Global Advisors is subject to eligibility requirements and the final terms of documents between potential customers and Lionsoul Global Advisors, as they may be amended from time to time.
