Crypto asset management firms have increased their on-chain allocations to $4 billion year-to-date, according to a new report by Artemis and Vaults, as decentralized finance (DeFi) becomes the "invisible backend" of fintech.
Surging Institutional Adoption of On-Chain Assets
A emerging class of "crypto-native" asset managers has significantly expanded blockchain-based holdings since early 2025, with institutional players increasingly leveraging DeFi protocols as operational infrastructure.
"The sector's on-chain capital base grew from approximately $1 billion in January 2025 to over $4 billion currently."
Key findings include:
- Major firms have deployed nearly $2 billion into Morpho Protocol's decentralized lending platform
- Gauntlet, Steakhouse Financial, and Re7 collectively control two-thirds of total value locked (TVL) among top crypto-native managers
- Regulatory clarity under the new U.S. administration boosted institutional confidence
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DeFi Emerges as Institutional Backend
The report highlights a paradigm shift in how traditional finance views decentralized systems:
- Mature Infrastructure: DeFi protocols now offer enterprise-grade reliability
- Regulatory Adaptation: Evolving U.S. policies enable compliant integration
- Abstracted Complexity: Institutions use DeFi as invisible plumbing rather than direct interfaces
"Platforms are embedding yield-generating mechanisms directly into user experiences while hiding the technical complexities," the analysts noted.
Three Pillars of Institutional DeFi
- Stablecoin Yield: Services like Coinbase's USDC rewards and PayPal's PYUSD offerings
- Crypto Lending: "DeFi mullet" models with fintech frontends (e.g., Coinbase Borrow using Morpho Protocol)
- Asset Management: Automated yield strategies through vaults and pools
UX as Critical Adoption Driver
The report identifies user experience improvements as key to sustaining capital retention:
- Simplified Interactions: One-click yield products
- Friction Reduction: Gasless transactions, batch processing
- Trust Signals: Transparent analytics and audit trails
"Protocols that combine reliability with intuitive design demonstrate stronger user stickiness," the analysts concluded.
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FAQ: Institutional Crypto Adoption
Q: Why are traditional asset managers moving on-chain?
A: Blockchain offers superior settlement efficiency, programmable assets, and access to global yield opportunities unavailable in traditional finance.
Q: How do institutions manage DeFi risks?
A: Through professional custody solutions, smart contract insurance, and rigorous protocol audits before deployment.
Q: What's the difference between crypto-native and traditional asset managers?
A: Crypto-native firms design investment products specifically for blockchain environments, while traditional managers often adapt existing financial instruments.
Q: Which DeFi sectors attract most institutional capital?
A: Currently decentralized lending (68%), stablecoin management (22%), and structured products (10%) dominate institutional allocations.
Q: Will regulations hinder DeFi adoption?
A: Current trends suggest regulators are establishing clearer frameworks that enable compliant institutional participation rather than restricting access.
Q: How important is UX for institutional DeFi?
A: Critical - even sophisticated institutions prioritize platforms with professional-grade interfaces and operational reliability over raw protocol yields.