| Crypto for Advisors |
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| DeFi and On-chain Finance: A Critical Year Ahead |
The recent security breaches in the crypto space have highlighted the importance of security as a key focus for providers. As institutions look to expand their adoption of decentralized finance (DeFi) and on-chain finance, 2025 is expected to be a critical year for growth and development.
One of the main drivers of this growth is the increasing interest in yield-bearing assets such as staking, liquid staking, restaking, and liquid restaking. In traditional finance, these types of assets are seen as stronger long-term investments due to their ability to provide ongoing cash flow and income. For example, ether is seen as more "productive" because it powers a network supporting a wide range of decentralized applications, benefiting from network effects.
The rising interest in staking has led to the growth of liquid staking, which enables frictionless and capital-efficient staking. This trend accelerated further in 2024 with the emergence of liquid restaking platforms such as ether.fi, which saw explosive growth last year, with over $8 billion worth of ether staked through its rails.
According to DeFi Llama, around one-third of all ETH is staked, with further inflows anticipated from traditional financial institutions exploring staking. As staking becomes more accessible through FinTech applications, some investors may transition from custodial to non-custodial solutions as they gain a deeper understanding of blockchain technology.
Global demand for U.S. dollar exposure is immense, and stablecoins are the most efficient way to meet it. Stablecoins like USDC expand access to dollar-denominated wealth preservation and streamline value exchange. In 2024, venture capital investments have flowed into stablecoin projects, and we anticipate further development in this space.
Regulatory frameworks such as the EU's MiCA have provided more explicit guidelines, further legitimizing stablecoins and likely driving higher adoption next year. Additionally, stablecoins are being integrated into traditional financial systems, with Visa using USDC on networks like Solana to facilitate faster and more efficient payments.
| Institutions and Their Bitcoin Holdings | |
|---|---|
| Mubadala Investment Company PJSC | $436 million in one bitcoin ETF, overall assets under management of $302 billion |
| Abu Dhabi's sovereign wealth fund (AIDA) | Manages a combined $1.7 trillion, indicating their bitcoin investment is a relatively small portion of the overall portfolio |
| State of Wisconsin Investment Board | Bits ETF holdings have more than doubled from last quarter to over $321 million |
| Bank of Montreal | $139 million in spot bitcoin ETF investments, topping Canadian banks with this amount |
Institutional investment and mainstream recognition are driving growth and development in the world of digital assets. As banks begin to hold crypto with SEC's SAB 122, it creates a positive move into a more flexible regulatory approach and balancing investor protections with the operational realities of financial institutions.
From sovereign wealth funds to pension funds and companies, the accumulation of bitcoin is just getting started. Mubadala Investment Company PJSC, the wealth fund owned by the government of Abu Dhabi, holds $436 million in one bitcoin ETF with overall assets under management of $302 billion.
In the U.S., the State of Wisconsin Investment Board's latest report shows its bitcoin ETF holdings have more than doubled from last quarter to over $321 million. And in Canada, Bank of Montreal is leading the charge, holding $139 million in spot bitcoin ETF investments and topping Canadian banks with this amount.
Currently, in North America, there are approximately 1,623 large entities holding over $25.8 billion in bitcoin ETPs. As institutions continue to invest in digital assets, it's likely that we'll see further growth and development in the world of DeFi and on-chain finance in 2025.
Q: Can banks hold crypto with SEC's SAB 122?
A: SEC's Staff Accounting Bulletin 122 may encourage banks to integrate digital assets into the regulated financial system. By opening competition, banks can compete with centralized exchanges. Banks can offer services like bitcoin-backed lending, staking and custodial services, which treat digital assets more like traditional assets.
Q: Which Institutions (e.g. sovereign wealth funds, pensions, companies, etc.) are buying bitcoin?
A: The accumulation by sovereign wealth funds, and pension funds is just getting started. Mubadala Investment Company PJSC (the wealth fund owned by the government of Abu Dhabi) holds $436 million in one bitcoin ETF with overall assets under management of $302 billion.
Q: Banking on bitcoin – Which Canadian bank is leading the charge?
A: Recent Q4 2024 SEC filings reveal that Canadian Schedule 1 banks, institutional money managers, pension funds and sovereign wealth funds have disclosed significant bitcoin holdings (see charts). Notably, Bank of Montreal now tops Canadian banks with $139 million in spot bitcoin ETF investments.
Q: Which Institutions (e.g. sovereign wealth funds, pensions, companies, etc.) are buying bitcoin?
A: The accumulation by sovereign wealth funds, and pension funds is just getting started. Mubadala Investment Company PJSC (the wealth fund owned by the government of Abu Dhabi) holds $436 million in one bitcoin ETF with overall assets under management of $302 billion.
Q: Banking on bitcoin – Which Canadian bank is leading the charge?
A: Recent Q4 2024 SEC filings reveal that Canadian Schedule 1 banks, institutional money managers, pension funds and sovereign wealth funds have disclosed significant bitcoin holdings (see charts). Notably, Bank of Montreal now tops Canadian banks with $139 million in spot bitcoin ETF investments.