Crypto Got What It Wanted. Now It Has to Deal With What Institutions Need.
Hodl Up6 min read·Just now--
For years, “institutions are coming” was crypto’s most reliable hype line. Every conference, every bull run, every whitepaper that needed a demand thesis fell back on it. And then, slowly, they came.
Bitcoin spot ETFs launched in January 2024. Ethereum ETFs followed in July. BlackRock’s BUIDL fund hit the headlines, then got added to Uniswap as a collateral asset — a moment that Cantor Fitzgerald called “a massive signal” for institutional DeFi interest. Tokenized real-world assets tripled to $18.5 billion over the course of 2025 and are projected to exceed $50 billion in 2026. The DEX-to-CEX perpetual futures volume ratio tripled from 6.3% to 18.7% last year alone.
The institutions showed up. The problem is that “institutions” was never one thing, and the industry is only now starting to reckon with that.
They Are Not One Bucket
Sitting down with Simon Jones from Reya at EthCC in Cannes, the most useful thing he said was also the most obvious thing nobody says out loud.
“We sort of use institutions in crypto as this one magical bucket. Actually, within that, there are many different types of institutions, and they have different needs.”
A trading firm evaluates infrastructure by speed, liquidity, spreads, and whether it can actually make money on the venue. An asset manager cares about custody, security guarantees, governance, and who picks up the phone when something breaks. A payment provider wants settlement rails, compliance coverage, and minimal friction. These are not the same product requirements. They are not even close.
Crypto spent years waiting for institutions to arrive, then kept building as if they would all want the same thing. They clearly do not.
This shows up clearly in the data. Sygnum Bank’s 2025 analysis pointed out that despite a tokenized RWA market exceeding $23 billion, meaningful institutional capital flows from pensions, endowments, and sovereign wealth funds are still largely absent. And that’s because legal enforceability of smart contracts remains unresolved for most institutional mandates, and the risk-adjusted return is not compelling enough to justify exposure to that unresolved risk. Most of the capital flowing into “institutional DeFi” today comes from asset managers, hedge funds, and crypto-native firms, rather than the large allocators the narrative implies.
What the Infrastructure Builders Are Solving
Sylvan Martin from SCRYPT framed the institutional problem as a bridge problem. Their clients — banks, asset managers, fintechs, payment providers — want access to digital asset markets, but the space is still too technical, too fragmented, and too legally ambiguous for them to navigate alone. SCRYPT’s pitch is a single regulated access point, with $32 billion in volume already processed, 250+ institutional clients across 40+ jurisdictions, and two licensing setups in Switzerland.
“We were doing our job diligently. And I think that creates that trust element, which is something clients from an institutional perspective are looking for as well.”
Trust, in this context, is not a soft idea. It is the product in itself. It is years of operation without losing client money, without regulatory fines, and through multiple market cycles. That track record changes the conversation with risk-averse capital.
Reya is solving a different piece of the same puzzle. Ethereum has won the security argument — around 63% of DeFi TVL and roughly 70% of tokenized assets sit on it. But Ethereum blocks take 12 seconds, and serious trading does not happen on a 12-second clock. By some estimates, high-frequency trading firms account for around 60% of crypto volume. None of them are operating natively on Ethereum today. And that is a meaningful gap.
Reya’s answer is a based rollup architecture where Ethereum validators remain central to security while execution runs at speeds professional trading desks require. The current live product already sits consistently in the top 10 by perp volume, with 10,000+ traders and 70+ markets. The ZK and based sequencing rollout is planned for the second half of 2026.
The framing Simon used was “internet capital markets” — a permissionless venue for crypto, spot, RWAs, commodities, FX, and equities in one place. That sounds like a roadmap item. It also maps exactly to what the institutional trading side of the market needs to operate onchain at real scale.
Credit Is Maturing Too, But Slowly
Onchain credit is the area where the gap between “institutional grade” claims and actual institutional capital is widest — and also where the most interesting structural work is happening.
The total value locked across major lending protocols rose 37.2% through 2025. The Block’s year-end data showed DeFi’s credit engine expanding as risk appetite returned. Maple Finance brought private credit onchain in a format that drew genuine institutional attention. Aave consolidated its position. Morpho captured new ground through distribution.
David Reising from Lotus Protocol came to EthCC with a specific diagnosis of what is still missing. The existing models — pooled lending like Aave, isolated markets like Morpho vaults — force a bad tradeoff. Pooled markets give you liquidity depth but conservative, one-size-fits-all risk parameters. Isolated markets give you precision but fragment liquidity. Neither is what a serious lender needs if they want to select their risk exposure rather than just accept the default.
“People just want things that they can understand when it comes to yield opportunities. How do we give those tools again to help them understand what the risk is without overwhelming them?”
Lotus is trying to solve this with connected tranches inside a single market — keeping collateral quality high while pricing different risk levels on the same curve. Safer tranches, lower rates, lower risk. Junior tranches, higher rates, higher exposure. Unused capital cascades only into safer positions. The goal is to make yield underwritable rather than just attractive.
That word — underwritable — is where institutional lending starts. Not “the APY is good.” Explaining where the yield comes from, what the collateral quality looks like, what happens under stress, and why a lender should choose one tranche over another. That is the language serious capital speaks.
Lotus is targeting a Q2 2026 mainnet launch on Ethereum and Arbitrum, with 19+ design partners confirmed.
The Compliance Layer Is Now Part of the Product
Ashna Vaghela from Mercuryo put the shift directly:
“It’s not so much about efficiency anymore. It’s more about trust. There are so many players in the industry, and what separates a lot of these players is the trust element.”
MiCA came into full effect for crypto-asset service providers in December 2024. In Mercuryo’s framing, this is a common rulebook that reduces grey areas and gives institutions a cleaner path in. The compliance layer is no longer sitting outside the product because it is the product in itself.
This is the deal crypto made when it went looking for institutional capital. You get the flows. You get the ETF approvals, the BlackRock integrations, the bank-grade custody solutions, and the regulatory legitimacy. In exchange, you accept compliance departments, reporting requirements, regulated counterparts, and — in the case of stablecoin infrastructure — issuers who can blacklist addresses and jurisdictions who can apply pressure.
None of that makes institutional DeFi fake. It makes it a different thing than what the whitepaper said.
What’s Important Now
The DEX-to-CEX perpetual futures volume ratio tripled in 2025. Tokenized RWAs hit $18.5 billion and are projected to exceed $50 billion in 2026. Congress passed the GENIUS Act on stablecoins, and further market structure legislation is expected in 2026.
But the companies that will matter in the next phase are not the ones repeating the “institutions are coming” pitch, but rather the ones who have understood what different institutions need — the trading firms who need speed and security without choosing between them, the asset managers who need risk they can explain to their boards, the payment providers who need settlement rails that are fast, cheap, and compliant.
The infrastructure is catching up to the narrative. The question is whether the industry builds it honestly — with real risk language, real compliance infrastructure, and real acknowledgment of what the tradeoffs are — or just keeps dressing the same old product in a new suit.
Based on what we heard in Cannes, some of them are doing the honest version. That is more encouraging than it sounds.
Hodl Up is a crypto podcast and research venture. Simon Jones (Reya), Sylvan Martin (SCRYPT), Ashna Vaghela and Arthur Firstov (Mercuryo), and David Reising (Lotus Protocol) were guests on the Hodl Up EthCC Series recorded in Cannes, April 2026. This is not a sponsored piece.
