Traditionally, institutions have been cautious about moving onto the blockchain due to regulatory risks. However, with the inflow of assets under management (AUM) for bitcoin ETFs expected to exceed that of gold ETFs within a year, finance and technology companies are exploring the technology and offering cryptocurrency products, while corporations are adding digital assets to their balance sheets. This has led to a surge in institutional interest in cryptocurrency. While the coexistence of off-chain and on-chain capital has mainly involved using on-chain capital to capture off-chain yield (such as Tether buying billions of dollars in U.S. treasuries), we are now seeing off-chain capital starting to move onto the blockchain with greater regulatory clarity. Recent post-election developments, such as BlackRock and Franklin Templeton expanding their tokenized money funds to new chains, indicate the significant amount of capital poised to enter decentralized finance (DeFi) and are just the beginning. In addition to tokenization, we have seen Stripe acquiring stablecoin startup Bridge, McDonald’s partnering with NFT project Doodles, and PayPal utilizing Ethereum and Solana for contract settlements. This integration streamlines asset management, improves market efficiency and liquidity, increases financial inclusion, and ultimately boosts economic growth. Regulatory clarity will further fuel this burgeoning activity.
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