Key Takeaways

• Asian markets lack the regulatory architecture needed to classify prediction markets, forcing regulators to leave them in a gray area.

• Western jurisdictions leverage existing frameworks like derivatives regulation in the US or betting laws in the UK, which create clear entry paths for operators and establish regulatory oversight.

• The absence of a framework in Asia does not suppress market activity, as evidenced by significant liquidity flowing into offshore platforms, but it prevents tax collection and consumer protection.

• Building a regulatory foundation requires a public deliberative process to determine whether prediction markets should be treated as derivatives, gambling, or a new third category.

1. Definition and the Importance of Classification

As that earlier report established, prediction markets have value as information platforms, but the law has never drawn a clean line between them and gambling.

That raises the question of how the law defines gambling, and in particular betting.

Section 9 of the UK’s Gambling Act 2005 broadly defines the subject matter of betting as follows, and brings any such activity within the scope of gambling regulation once monetary value attaches to it.

• the outcome of a race, competition or other event or process,

• the likelihood of anything occurring or not occurring, or

• whether anything is or is not true.

Under this legal definition, prediction markets attach economic value to the outcome of a specific event or the determination of a fact, which means they share much of their structural core with betting, the central element of gambling.

The core of the regulatory debate ultimately comes down to a question of definition: whether to 1) bring prediction markets within the traditional gambling regulatory framework, 2) reclassify them under a financial architecture such as derivatives, or 3) establish them as an independent category through separate legislation.

2. The West: How Institutional Pathways Produced Different Outcomes

Compared to Asia, Western jurisdictions have a more permissive stance toward prediction markets, but not because of a cultural tolerance for gambling. It reflects the availability of institutional architecture that allows them to bypass a direct confrontation with gambling law. The main pathways were as follows.

• United States: Prediction markets were classified as derivatives (swaps) under the Commodity Exchange Act and brought within the existing registration framework.

• United Kingdom: The market was accommodated within a general-purpose “betting intermediary” licensing regime.

• European Union: Where contracts are classified as financial instruments, a binary options ban applies; where that classification is avoided, strict national gambling laws present a second barrier.

The consistent pattern is that institutional incorporation was only possible in jurisdictions that possessed an alternative regulatory framework, derivatives law or a flexible licensing regime, independent of gambling statutes.

2.1. United States: Extending the Definition of Derivatives

The United States accommodated prediction markets not by endorsing the gambling framing but by applying the existing contract structure of the Commodity Exchange Act (CEA) in a purposeful way.

• Commodity Futures Modernization Act of 2000 (CFMA): Established the foundation through an open-ended definition of “excluded commodity,” which allowed non-financial variables such as election outcomes and weather events to be classified alongside conventional commodities such as crude oil.

• Dodd-Frank Act of 2010: Gave the CFTC two critical powers:

  1. Exclusive federal jurisdiction over event contracts.

  2. The authority under Rule 40.11 to prohibit individual contracts related to terrorism, assassination, war, and gaming.

Neither statute was designed with prediction markets in mind, but together they created the legal basis for treating such contracts as financial agreements rather than gambling. They also established a centralized regulatory counterparty in the CFTC, replacing what would otherwise have been a fragmented process of state-by-state lobbying.

The legal architecture that accumulated over time produced a market ordered around licensed entities.

In November 2020, Kalshi secured Designated Contract Market (DCM) status, allowing it to sell a broad range of event contracts to retail investors. Polymarket, after a 2022 enforcement action, moved toward regulatory compliance through its 2025 acquisition of licensed exchange QCEX.

2.2. United Kingdom: Incorporation Through a General Licensing Framework

Rather than treating prediction markets as an extension of derivatives, the UK approached them as a form of betting and used the existing Gambling Act 2005 to accommodate them within the regulatory perimeter. Three provisions were particularly important.

• Section 9: Defines betting broadly enough to provide a flexible legal foundation for prediction markets.

• Section 13, “betting intermediary”: Captures the structural feature of prediction markets precisely, as they match contracts between users rather than taking direct positions themselves.

• Section 65(4): Allows the licensing categories to be adjusted by ministerial order, giving the framework the capacity to absorb new market models without separate legislation.

In February 2026, the Gambling Commission clarified that prediction market platforms fall within the “betting intermediary” category and must obtain the corresponding license. ,. Rather than a blanket prohibition, this constituted a clearly defined entry path, with strict penalties for unlicensed operation on one side and an open registration window on the other.

Despite this established framework, the major global platforms have been cautious about entering the UK market, for reasons rooted in their US litigation strategy.

Both Kalshi and Polymarket have staked considerable legal argument on the position that prediction contracts are financial derivatives rather than gambling. Obtaining a UK “betting intermediary” license would formally designate them as gambling operators, which would undermine their legal position in ongoing US proceedings.

This gave the UK a market environment shaped differently from the global standard, one that in practice created ideal conditions for UK-local operators to build their business. Matchbook, an existing betting exchange, drew on its betting intermediary license to launch “Matchbook Predictions” in January 2026, and Versus, a newer entrant, obtained a UKGC general betting license and launched its own prediction market.

2.3. Europe: Dual Closure Under Financial and Gambling Regulation

The regulatory landscape on the European continent combines financial regulation under MiFID II with individual national gambling laws to form a two-layer barrier.

• Any contract classified as a financial instrument immediately encounters the binary options prohibition.

• Any contract that escapes that classification then faces strict national gambling definitions.

In July 2026, the European Securities and Markets Authority (ESMA) made the financial regulation dimension explicit in an official statement, which stated that the binary payout structure of event contracts falls squarely within the scope of the binary options ban. This effectively closed the financial product route into the European market.

Prediction markets face equally difficult conditions under gambling law. France is the clearest illustration: the Autorité Nationale des Jeux (ANJ) implemented a phased enforcement escalation that concluded by classifying prediction market operations as illegal gambling.

The one exception is Gibraltar. In July 2026, Gibraltar designed a dedicated legislative framework, the Prediction Market Regulations, that defines prediction markets as a distinct “third category.” This is a strategy of creating a new pathway rather than working within the existing frameworks, but as Gibraltar is not an EU member state, the approach has the limitation of not being subject to mutual recognition within Europe.

The closed structure in Europe is not necessarily permanent, however. The European Commission has currently made the legal treatment of prediction markets a formal item under review as part of its Markets in Crypto-Assets Regulation (MiCA) review process. Depending on the conclusions of the report due in June 2027, the door remains open to a shift toward a new institutional framework for accommodating prediction markets.

3. Asia: The Present State of Institutional Absence

Asian jurisdictions have two structural obstacles that do not exist in the same form in Western markets.

• State-controlled gambling licensing: There is no general-purpose licensing framework capable of accommodating private sector innovation in the manner of the UK’s “betting intermediary” category. Licensing authority is allocated through state-controlled monopoly structures.

• Constraints on financial product classification: The financial laws of South Korea and Japan use closed, positive-list definitions of underlying assets, which makes the kind of broad reclassification the US achieved through the concept of “non-financial contingent events”, legally unavailable.

As the Western cases demonstrate, whether a prediction market takes hold depends on which path defines it, either existing financial product architecture or gambling regulation. The fundamental constraint facing Asian markets, however, is that neither classification system offers an institutional foundation capable of accommodating this new business model.

Legal betting markets already exist across Asia, in Japan, South Korea, Singapore, and Hong Kong, so any view that denies the market on grounds of emotional resistance or cultural specificity diverges considerably from the actual situation.

The central question, then, is not whether the market is socially accepted, but how a regulatory foundation could be designed to accommodate this new market model.

3.1. South Korea: Absent Architecture and Criminal Enforcement as the Default

Domestic discussion of prediction markets has not reached the stage of debating their legal status or social value. The existing regulatory framework treats them as speculative products by default, which cuts off substantive deliberation before it can begin.

The relevant statutory provisions are already in conflict with how prediction markets operate. The Act on Special Cases Concerning Regulation and Punishment of Speculative Acts covers “prize businesses,” defined as businesses that distribute money or property in exchange for correctly predicting the outcome of a specific event. This is structurally similar to what prediction markets do.

The legal question is not fully resolved, however. Prize business law presupposes a casino-style structure in which the operator directly controls the stake pool. Modern platforms such as Polymarket use a matching architecture in which the operator facilitates contracts between users rather than holding funds directly. No judicial interpretation has yet addressed how this structural difference would be treated under existing statutes.

The financial regulatory route is also closed. The Capital Markets Act uses a positive-list approach to defining underlying assets. While financial indicators are covered, there is no explicit basis for classifying non-financial variables such as election outcomes as derivatives.

Because the right to operate betting businesses is in any case reserved for state-monopoly entities, private platforms cannot enter the market through this channel either.

3.2. Japan: Sophisticated Workarounds and the Limits of an Informal Practice

Prediction markets in Japan have followed a pattern of regulatory workaround rather than institutional incorporation.

The method local platforms have adopted resembles the three-shop system, a mechanism that originated in the pachinko industry, in that it physically severs the direct cash flow within the operating process.

• Platform operator: The platform blocks direct cash deposits and instead runs a free reward model based on activities such as watching advertisements. It also eliminates any cash exchange function within the platform itself, which removes “gain or loss through property” as a defining element of gambling.

• Reward issuer: A third party independent of the platform issues the reward, such as a gift certificate, for a successful prediction. Separating the platform operator from the issuing entity removes the legal risk of the operator becoming a direct party to the exchange of rewards for cash.

• External cash-out market: A peer-to-peer transfer market and affiliated merchants outside the platform form the ecosystem where the reward is actually spent or converted into cash. Because the operating platform does not participate in this distribution process, the structure remains independent and avoids meeting the legal elements of the offense of gambling.

This is ultimately an informal commercial practice that emerged in a regulatory grey zone rather than a structure built on firm legal footing. Global platforms are either blocked from the Japanese market or operating under strict constraints through cryptocurrency exchanges. The substantive level of policy discussion in Japan is not materially different from that in South Korea.

4. What Asian Markets Are Forgoing

The absence of institutional architecture in Asia does not mean that the market does not exist. More than $52 million (approximately ₩72.8 billion) in liquidity flowed into prediction markets tied to South Korea’s June 2026 local elections, demonstrating that user participation in offshore platforms has already crossed a meaningful threshold even without a domestic regulatory framework. These transactions fall outside the tax system, consumer protection mechanisms are absent, and market integrity oversight is impossible.

Regulators face three available responses:

1. Extend existing criminal statutes to impose sanctions (the current South Korean approach).

2. Use technical means to block platform access entirely (the Singapore model).

3. Bring prediction markets within the regulatory perimeter, capturing tax revenue and supervisory authority in the process.

Only the third option can precisely achieve the practical regulatory objectives of tax collection, consumer protection, and market transparency.

Global annual transaction volume in prediction markets is projected to exceed $200 billion in 2026. Assuming conservatively that South Korean domestic users account for 1% of that volume, transaction volume attributable to any given Asian market would reach $2 billion. Depending on the tax model adopted, that would generate estimated new annual tax revenue of between $4 million and $43.2 million.

The more important point is not the size of these figures in isolation. Without regulatory accommodation, these transactions will not disappear; they will continue in an unregulated environment. Regulators will forgo both tax and supervisory authority while continuing to bear administrative and criminal enforcement costs.

5. Reframing the Regulatory Approach to Prediction Markets

As noted above, the institutional accommodation of prediction markets depends on which existing regulatory architecture, gambling or financial product, is used to define them.

• Gambling regulatory framework: This path adapts existing Asian models for state-approved speculative activities, such as sports betting pools or integrated resort casinos. It is consistent with the state monopoly structure and can be justified through the public fund rationale, but it has inherent limitations in accommodating the business models of private platforms.

• Derivatives regulatory framework: This represents the most operationally viable path with the least legal friction. It would involve fine-tuning the definition of financial products, drawing on precedents such as the acceptance of non-financial variables under Japan’s Financial Instruments and Exchange Act (FIEA) or on the language of “economic risk” in Korea’s Capital Markets Act. This approach avoids direct conflict with existing state gambling monopolies while pre-empting concerns about speculation and market manipulation by limiting eligible underlying assets to publicly verifiable statistical variables.

• Creation of a standalone third category: This involves designing a dedicated legislative framework, as Gibraltar has done. It allows for the most precise regulatory calibration but carries the highest legislative and political costs, given the absence of precedent.

It is worth noting that this is a long-term institutional undertaking rather than a near-term outcome. In many Asian jurisdictions, basic public discourse on the legal identity of prediction markets has not yet formed. Securing the legislative momentum necessary for any of these paths requires first establishing a public deliberative process and building broad social consensus on the value of prediction markets.

One point worth noting is that prediction markets remain an unfamiliar concept across Asia, and no entity has taken the lead in shaping discourse around the prediction market. As a result, even the most basic agenda items have yet to be discussed.

Precisely analyzing how prediction markets function overall requires a formal public forum, such as a public-private roundtable, built around the core issues raised above, and establishing one is now an urgent priority.

Even once that level of discussion is set, an entity capable of carrying it onto the actual policy table is essential. Specialized research organizations such as Limitless Research demonstrate data-driven forecasting models in practice, and in doing so play a central role in establishing the market’s value system and shaping public discourse.

The process by which organizations with specialized analytical capacity, beginning with Limitless Research, demonstrate the reliability and public value of their data will be the decisive catalyst that elevates the fragmented discourse on prediction markets into a core agenda item within the institutional system.

Prediction markets carry distinct benefits and risks, though reaching an institutional conclusion before that debate has even taken place would be a hasty approach that overlooks the core issue. What is needed now is the constructive discourse that has not yet occurred.

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Disclaimer

This report was partially funded by Limitless. It was independently produced by our researchers using credible sources. The findings, recommendations, and opinions are based on information available at publication time and may change without notice. We disclaim liability for any losses from using this report or its contents and do not warrant its accuracy or completeness. The information may differ from others’ views. This report is for informational purposes only and is not legal, business, investment, or tax advice. References to securities or digital assets are for illustration only, not investment advice or offers. This material is not intended for investors.

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As of 2026, blockchain technology still hasn’t changed the world. But will it have brought major change by 2036?

All aboard — the time machine is departing for 2036.

1. “Does anyone still use paper money?”

The year 2036, A currency exchange booth in Zutopia, a fictional country vulnerable to inflation. Judy, thirty-four years into the job now, pulled a bill counter from the drawer and started counting Bucks.

“Still someone using Bucks.”

It made sense. The value of Bucks, the currency of an inflation-prone nation, fell a little more every day. It still existed by law, but in practice, no one used it anymore. Everyone used dollar stablecoins in daily life instead.

Tap-tap-tap-tap.

Judy listened to the counter clatter through the bills and thought back on the years.

In 2002, Judy was twenty-two. That year, Zutopia declared national default. Banks locked their doors, and people couldn’t withdraw the savings they’d spent a lifetime building.

“We need to go change it now.”

Judy’s father said. The moment your salary hit your account, you had to change it into dollars right away. Wait even a single day and the value of Bucks would visibly shrink. People checked the black-market dollar rate before they checked the front page.

“What’s the dollar at today?”

This question opened every day. Buying dollars at the official rate was next to impossible. The government set a monthly cap on how much foreign currency a person could buy, and no one knew when the banks might freeze dollar deposits.

Then, in the mid-2020s, young customers started asking a question she didn’t understand.

“Can I exchange USDT too?”

At first, only a handful of freelancers and exporters used it to receive money from abroad. No bank required, no lining up in front of a money changer. One phone, and you could turn Bucks into stablecoins, then back into Bucks whenever you needed.

At the time, Judy never thought it would replace her job. The elderly still wanted cash, and plenty of businesses still needed it too. But the line got shorter, bit by bit. The young customers disappeared first. Then the middle-aged ones.

By 2030, there was no line even on payday. Once companies had no reason to hold Bucks either, they started paying part of wages directly in stablecoins. Bucks became a currency you needed only to pay taxes and utility bills.

In 2033, the tax office changed its stance. The calculation was simple: it was better to collect overdue taxes in stablecoins than in Bucks. A short notice went up on the website.

“USDC and USDT accepted as alternative payment for tax filings”

Bucks still existed, but the state itself had just announced it would rather take someone else’s money than its own.

In 2034, the treasury followed. Bond auctions denominated in Bucks kept failing, and the treasury eventually issued new bonds denominated in dollar stablecoins. Civil servants’ pay came next. In 2035, some state governments began paying half of civil servant salaries in stablecoins — because the civil servants paid only in Bucks were the first, and the hardest, hit by inflation.

Printing money, collecting taxes, paying civil servants — these had always been the state’s power alone. That power moved to stablecoins, one piece at a time.

As of May 2026, the total stablecoin market stood at roughly $320 billion, with $28 trillion in annual transaction volume. Set against a U.S. wholesale payment network processing over $2 trillion a day, that was barely three weeks’ worth of volume. Strip out the wash trading and phantom volume, and less than 6% was actually used for real payments. The remaining 88% just circulated inside exchanges — trading, collateral, and back again.

The question was where that 6% was actually happening. It might have started in New York and Silicon Valley, but the place where that money actually changed hands wasn’t America. Americans got by just fine with their credit cards and bank accounts. The ones who desperately needed stablecoins were the people in countries where their currency melted away a little more every day.

Judy put the counter back in the drawer. Would there be a customer tomorrow?

2. Liquidated in Ten Minutes, at 2 A.M.

The year 2036, A small rented room in Singapore.

Two in the afternoon. A notification sound, and Lia checked her phone. A limit-order alert for Nvidia.

Two p.m. in Singapore is a time when the New York Stock Exchange isn’t even open. But on Lia’s screen, the Nvidia chart was still moving. She hit buy without hesitating. On the same screen, beside Nvidia, sat Treasury bonds, real estate REITs, and data-center infrastructure funds, all in one view.

By 2036, you didn’t just trade stocks — you could trade everything in the world.

“Investing never stops, no matter where you are.”

It was something Lia said often. For her, the world had always been like this.

In 2021, when Lia was nine, retail investors in the U.S. sent shares of GameStop, a brick-and-mortar game store, soaring. It was investing where participation itself became the point, more than the asset’s value — and the thing organizing that participation wasn’t a brokerage. It was an online community.

According to a 2025 World Economic Forum survey across 13 countries, 30% of Gen Z started investing the moment they became adults — far above Gen X (9%) and Baby Boomers (6%). Gen Z’s interest ran so deep that 86% had learned to invest before even entering the workforce, versus 47% for Boomers.

In Coinbase’s Q4 2025 survey, 73% of young respondents said it was hard to build wealth through traditional means — higher than the 57% among older generations.

For this new generation, investing had simply become a given — and they wanted exposure to more of everything.

June 2025. Tokens collateralized 1:1 against major U.S. stocks — Apple, Tesla, Nvidia — poured onto decentralized exchanges (DEXs). No nationality restrictions, no strict KYC checks. All you needed was a wallet address, and U.S. stocks were within anyone’s reach, with leverage effectively unlimited.

I can just try again tomorrow.

Lia logged into Lemming Brothers, a borderless trading platform, and bought a tokenized Korean real estate index product. Ten minutes later, her phone buzzed with a liquidation alert. She waved off the warning on her screen like it was nothing.

For Lia, phone notifications in 2036 are like background music to daily life. She checks the endless stream of signals from her trading apps and picks the phone back up again. It’s a complete contrast to her parents, who dollar-cost average into so-called “safe assets” on regulated exchanges.

In the world Lia lives in, every kind of value has been converted into an asset, moving nonstop, twenty-four hours a day. This vast market, which never pauses for even a moment, keeps tempting her toward the next trade — today, same as every day.

3. The Day $2.2 Billion Evaporated

The year 2036, A startup office in Pangyo Techno Valley.

Do-hyun, now twelve years into his career as an infrastructure engineer, was scrolling through the network status dashboard on his monitor when his hand stopped. Looking at the list of chains that now fit cleanly on a single screen, he murmured under his breath.

“Ten years ago you’d have scrolled forever. Now there’s not even ten left.”

2024, the year Do-hyun started his engineering career, was truly the Age of Discovery for Layer 2 (L2) rollups. Anyone could copy and paste a few lines of framework and stack code and launch their own blockchain under their own name. Do-hyun’s company rode the massive infrastructure wave too, building out validator nodes.

The chain’s name was Allchain. In June 2024, on airdrop hopes, Total Value Locked (TVL) swelled to $2.2 billion. He could still vividly remember clinking beer glasses in the conference room, cheering with the team.

“At this rate, aren’t we going to be the next Ethereum?”

But the joy of listing was fleeting. Once the token listed and the airdrop rewards ran dry, the token price and chain usage fell off a cliff. The projects and users who’d been chasing rewards turned their backs on Allchain the moment it stopped paying, and within a single year, 97% of the deposits had evaporated.

Allchain’s brutal ending wasn’t unique. The countless independent networks that had sprung up like mushrooms back then collapsed the same way. They’d lured development teams in with the sweet reward of incentives, but the moment the funding dried up, the ecosystem hollowed out in an instant, leaving nothing behind but silent, empty shells of infrastructure.

The astronomical fixed costs of running an independent chain were more than individual projects could bear. Unable to withstand the soaring infrastructure upkeep, the Allchains, one by one, declared they were shutting down and faded into history.

Only a select few survived capital’s cold scrutiny. The hundreds of chains that once looked ready to change the world carved up the ruins of a market share barely above 10%, then walked, without a sound, into extinction.

Back then we all thought we’d survive and build our own massive ecosystems…”

Back in 2026, people mistook the number of chains for blockchain scalability itself. But fragmented chains only broke the user experience apart and drove security costs through the roof. What people actually wanted wasn’t hundreds of complicated networks — it was a handful of massive, foundational infrastructures offering liquidity that would never crack, at optimized speed.

Do-hyun let out a long sigh, quietly closed his monitor, grabbed his bag, and headed home.

4. The “Human Eyes” That Used to Click Are Gone

The year 2036, A media startup office in Sangam-dong.

Jae-hoon happened to be browsing another platform when he saw a banner ad in the bottom right corner and laughed.

“There’s still a company out there sticking banner ads on their screen, waiting for readers.”

Jae-hoon was right. That platform’s daily visitor count was hitting new all-time highs every month, but the traditional banner ad revenue simply wasn’t coming, and that whole model of advertising had become a thing of the past.

Back in the early 2020s, when Jae-hoon first stepped into the media industry, the formula for the web economy was crystal clear. Write good articles, and readers came. Readers came, and advertisers paid to put up their banners.

“How many pageviews did we get today?”

This question, which opened the conference room every morning, decided whether a media outlet survived back then.

But that peaceful formula started to disappear in the late 2020s. As of 2029, more than half of all global web traffic began coming not from people but from AI agents and bots. AI would scrape an article and summarize it in a second flat — but machines simply didn’t have “eyes” to look at a banner ad.

At first, like most media companies, they blocked the bots. The server costs were exploding, and they simply couldn’t keep up. But blocking came at a brutal price. Buried entirely out of AI search and recommendation ecosystems, their brands were simply forgotten. Media companies faced an agonizing choice back then: block the bots and lose their traffic, or leave the door open and make no money.

“Who are we even selling our content to now?”

That desperate question filled the office. The answer wasn’t the ad board — it was putting a price on the content itself.

What opened the floodgates for change was the x402 standard, unveiled by Coinbase in May 2025. It resurrected, through technology, the HTTP 402 response code — the “Payment Required” signal — that had sat abandoned in a corner of the web standard for thirty years.

Up through 2029, the focus was on building foundational infrastructure: Know Your Agent (KYA) verification, settlement rails, and the like. The real explosion began in 2030, when one media company started selling data directly to AI through the x402 system. Once it proved out, other media and data companies wasted no time adopting x402 and jumped into data sales themselves.

At first there was plenty of mockery — pocket change, a few dozen won at a time, hardly worth the effort. But once hundreds of thousands, even millions, of machine calls piled up every day, real, substantial cash started landing in the account, far more than the old banner ad revenue ever brought in.

“No more worrying about what advertisers think — the machines pay full price, and the company runs on that.”

The old model of web advertising, catching human eyes to sell ads, slowly drew to a close, and the Machine Economy, where agents trade through APIs, moved into full swing.

Jae-hoon closed the dashboard and picked up his coffee cup. The visitor graph still traced that strange, near-vertical climb that made no sense by the old standards — but it’s just routine now. He doesn’t check how many people showed up. He checks how many AI agents paid today.

Tomorrow, hundreds of thousands of agents will knock on his server’s door again, and that honest line of transactions won’t be getting any shorter — not anymore.

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On July 22, 2026, SEC Commissioner Hester Peirce issued a statement titled "Headstands and Summervaults," identifying on-chain vaults and lending strategies as potential subjects of existing securities law. This report examines the parties likely to be affected and how the industry is responding.

Key Takeaways

• Applied broadly, the legal reasoning could extend beyond vaults and curators to discretionary products generally, a segment representing approximately $25.9 billion in TVL.

• The SEC is not targeting code that operates outside its reach. It is targeting the human actors who exercise discretion over that code.

• Teams building compliance-oriented DeFi protocols, including Steakhouse Financial and Maple Finance, have been anticipating and preparing for exactly this kind of regulatory attention.

• Historical precedent suggests that only two outcomes have proven durable: full registration under existing securities law, or the creation of new statutory exemptions through legislation.

• The responses currently available to market participants are, at best, interim measures. Only curators with sufficient capital to build post-action compliance infrastructure will retain their market position. Smaller curators without those resources will be displaced.

1. The SEC Is Targeting Discretion, Not Code

On July 22, 2026, SEC Commissioner Hester Peirce issued a statement titled “Headstands and Summervaults,” arguing that the Howey Test, the legal standard established by a 1946 Supreme Court decision, could be applied to on-chain vaults and lending strategies under existing securities law.

The Howey Test evaluates the economic substance of how capital is raised and managed. It does not require new legislation or regulatory rulemaking to be applied. It is a fact-based standard that has been consistently applied to new financial instruments regardless of their technical form. An on-chain vault or decentralized lending strategy, however sophisticated its blockchain architecture, could qualify as an investment contract under securities law if its structure satisfies the test’s three core criteria. When all three are met, the product is classified as a security.

The statement carries no immediate enforcement authority, as it reflects the view of a single commissioner. It is, however, the first instance in which the SEC Crypto Task Force’s developing framework has been mapped onto specific products, and it has prompted concern among relevant market participants.

MORPHO, the token of the vault infrastructure protocol Morpho, fell roughly 5% immediately after the announcement.

If this legal reasoning were to be applied in practice, the regulatory target would almost certainly not be the smart contracts that power the vaults. It would be the risk curators and the DeFi actors who exercise real discretion over how assets are deployed. The vault infrastructure that Morpho has built is a technical instrument for asset management. Code with no controlling party is not a natural subject of direct regulatory sanction.

2. Why Curators Are the Target

Curators determine how much capital is allocated across a vault and what level of risk that capital is exposed to. In that sense, they exercise genuine discretion over depositors’ assets. The vault itself is simply a tool through which curators manage those assets. Most vaults are built as smart contracts deployed without admin keys or upgrade permissions, meaning even the original deployer cannot halt their operation or alter their logic.

Financial regulation, as it has historically operated, presupposes the existence of an identifiable legal entity capable of receiving a subpoena, having assets frozen, or complying with a cease-and-desist order. Immutable code with no controlling party has no such administrator.

The regulatory consequence is that enforcement attention has moved from code to discretion. Earlier cases involving Tornado Cash and Uniswap Labs illustrate the pattern.

The Tornado Cash case turned on whether immutable code could constitute sanctionable property. The Uniswap Labs case asked whether the company operating a non-custodial interface had effectively functioned as an unregistered broker or exchange. Both cases focused on the legal status of code and the act of running a service. Neither reached the question of investment discretion as a basis for securities liability.

This case is different. The operative question is no longer who built the protocol but who selects which assets a depositor’s capital is exposed to, how much is allocated to each market, and how interest rate conditions and collateral parameters are adjusted to influence returns. Consider a curator that selects specific lending markets from a broader set, withdraws capital when risk rises, and shifts weight toward higher-yielding markets. Depositors place their capital with that curator because they trust its judgment, not because they trust the underlying smart contract. Returns and losses flow directly from the curator’s decisions. That pattern of professional discretion exercised on behalf of depositors is precisely what gives rise to the “expectation of profits from the efforts of others” that the Howey Test identifies as a defining feature of an investment contract.

The curator is the most clearly identifiable party exercising that discretion within the on-chain vault ecosystem. That is why it sits at the center of the regulatory frame.

3. Which Categories Fall Within Scope

If this legal reasoning is applied broadly, its reach does not stop at risk curators. The SEC’s analytical focus is on who is making investment decisions on behalf of users.

Liquid restaking operators decide which validators or actively validated services (AVSs) receive asset allocations. Yield aggregators compare returns and risk across lending and liquidity markets and move capital accordingly. On-chain asset allocation services adjust holdings and weights over time. Where a specific team or operator is making ongoing decisions about asset selection and reallocation, the function is materially similar to that of a curator.

The relevant scope is therefore wider than the vault product category alone. Whether any specific service falls within it depends on who, within that service, is selecting assets, changing allocations, and controlling exposure to loss. Aggregating potential exposure across categories defined by that criterion produces a total TVL of approximately $25.9 billion.

The legal standard is unlikely to be applied uniformly across all of these participants. Its intensity will vary with the structure of the discretion involved.

• At higher risk, where regulatory scrutiny would be most intense, are structures in which discretion is exercised opaquely in ways depositors cannot verify on-chain in real time, such as off-chain delegation and undercollateralized lending.

• At medium risk are standard vault curators and liquid restaking structures that exercise allocation discretion, with capital flows recorded transparently on-chain and constrained by governance mechanisms such as timelocks and guardian roles.

• At lower risk, and closest to compliance, are immutable protocol deployments with no controlling party, and financial products already registered under securities law.

The parties most accurately positioned to assess their own legal exposure are the operators themselves. This is why curators and adjacent market participants began developing tailored responses, including investor qualification restrictions, third-party compliance arrangements, and formal private placement exemptions, before the commissioner’s statement was issued.

4. Four Design Approaches to Reducing Regulatory Exposure

The responses developed to date do not resolve the underlying legal question. They are focused primarily on reducing the probability of regulatory application and limiting the legal liability of the operating entity.

Two analytical axes separate the approaches: whether a recognized legal exemption has been obtained, and whether actual asset allocation authority has changed. Measured against those criteria, the market’s current responses fall into four types.

1. Direct investor qualification: advance verification and sales restricted to accredited or qualified investors.

2. Established regulated distribution channels: routing through exchanges or regulated entities that have completed KYC on their users.

3. Collateral-level whitelisting: controlling permitted collateral assets through coordination with asset issuers.

4. Structural separation of permissioned lending and permissionless yield tokens: bifurcating institutional lending execution from retail-accessible yield exposure.

4.1 Investor Qualification: Grove and GLDY

The most direct way to reduce regulatory exposure is to control investor eligibility before any capital is accepted.

Steakhouse Financial launched Grove in June 2025 as an institutional-only on-chain capital allocation channel. Access is restricted to institutional RWA investors who have passed advance qualification screening.

Orca, in May 2026, partnered with Streamex Corp (Nasdaq: STEX) to open the GLDY pool for accredited investors only. GLDY is a yield-bearing tokenized security backed by physical gold reserves, issued explicitly under Regulation D, Rule 506(c), the private placement exemption under U.S. securities law. Investor accounts begin with on-chain transfers frozen and are unlocked only after passing Streamex’s KYC and accredited investor verification.

Both approaches target institutional and accredited investors, establishing a logical basis for using the private placement exemption without full public registration.

Investor qualification, however, does not neutralize a product’s characterization as an investment contract under the Howey Test. Accredited investor status is more directly relevant to the distribution path than to the question of whether a security exists in the first place. This is a practical risk-management approach within the current legal framework, not a fundamental change in legal character.

The curator’s core function of selecting assets and setting allocation weights within the vault remains unchanged, which is the structural limitation these access controls cannot address.

4.2. Existing KYC and Compliance Infrastructure: Sentora

Rather than building its own qualification framework, Sentora combines existing KYC-based distribution channels with regulated asset issuance infrastructure.

Kraken’s DeFi Earn product is the clearest example. Veda provides the vault infrastructure; Chaos Labs manages the Balanced and Boosted vaults; Sentora serves as risk manager for the Advanced vault, overseeing capital allocation across on-chain protocols and managing risk and liquidity.

This arrangement has since been adopted more broadly. Coinbase has combined Morpho and Steakhouse Financial to launch USDC lending through Prime and High Yield vaults. Binance has connected its users to Morpho vaults managed by Steakhouse and Gauntlet.

Exchange-level KYC confirms user identity, and issuer compliance frameworks support reserve and redemption structures. Neither addresses who is deciding which assets and markets receive how much capital. External compliance infrastructure reduces risk at the asset and distribution level but does not absorb the regulatory exposure or legal liability of the risk manager making allocation decisions.

4.3 Asset-Level Whitelisting: Aave Horizon

Aave launched Aave Horizon in August 2025 as an institutional RWA lending market. The product is structurally separated from the core protocol and designed to the specifications required for institutional asset management.

Aave Horizon’s distinctive design choice is to share control over permitted collateral with asset issuers rather than restricting user access directly at the distribution stage. Whitelists for tokenized collateral assets are managed by the issuers themselves: Circle, Ripple, Superstate, and Centrifuge (which includes Janus Henderson products). The protocol itself remains permissionless for any wallet holding whitelisted assets.

The governing control is not who accesses the market but which assets are eligible. Risk parameters follow recommendations from LlamaRisk, and collateral valuations are supported by NAV data verified by Chainlink in real time. Aave Horizon builds on existing Aave lending infrastructure rather than constructing a new chain or independent protocol.

Sharing verification responsibility with asset issuers does not extinguish Aave Horizon’s own legal and operational liability for its risk parameter decisions.

4.4 Structural Separation of Permissioned Lending and Permissionless Yield: Maple Finance

In April 2024, Maple Finance converted its entire platform to a whitelist structure. All loans are now fully overcollateralized, and Maple Direct, its in-house credit team, conducts borrower underwriting, ongoing monitoring, and margin calls directly. Access is limited to approved institutional borrowers and lenders.

The most notable aspect of Maple’s design is the separation between the permissioned lending operation and permissionless yield access. In 2024, Maple launched the Syrup protocol, through which retail users can deposit USDC without KYC and receive SyrupUSDC in return. Those deposits flow into the same institutional lending pool that Maple Direct already manages with its accredited borrowers. The lending itself operates under rigorous institutional compliance. The right to receive the yield that lending generates is packaged into a permissionless token and made available to any user.

This structure relocates regulatory exposure rather than eliminating it. Maple Direct’s underwriting and management discretion, including borrower selection, collateral terms, and margin calls, remains intact. The arrangement by which institutional lending returns are passed to SyrupUSDC holders generates its own question of whether that token constitutes an investment contract under the Howey Test, together with separate distribution liability.

The structural separation of permissioned lending and permissionless yield is a deliberate repositioning of where regulatory scrutiny lands. It does not change the legal liability of the entities managing the capital or the fundamental nature of the product.

The cases above address different regulatory contact points but share a common limitation. They are operational defensive structures designed to manage regulatory exposure by separating investors, assets, and distribution channels. They are not final solutions that extinguish legal risk.

Mapped against the two analytical axes introduced earlier:

• One approach has obtained an explicit legal exemption: the Orca/GLDY structure, which applies Regulation D, Rule 506(c) directly.

• The remaining approaches manage and constrain regulatory exposure: Grove, Sentora, Aave Horizon, and Maple Finance, through a combination of institutional qualification restrictions, third-party compliance infrastructure, and collateral whitelisting.

Restricting distribution and filtering eligibility does not resolve the underlying legal liability that attaches to a curator or protocol’s discretionary asset selection and allocation decisions.

5. What History Shows Works

The future of the on-chain asset management market will be determined not by the surface appearance of the code but by the institutional frameworks established to govern the scope of discretion, the transparency of disclosure, and the allocation of legal liability.

The measures examined above reduce immediate regulatory exposure and provide room to use existing private placement exemptions. They do not answer the foundational questions of what criteria govern a curator’s allocation decisions and who bears responsibility when losses occur.

The historical record is consistent on one point: access restrictions alone have not produced durable institutionalization.

• Closed-end funds in the 1920s and 1930s saw widespread abuse of “blind pool” structures in which managers did not disclose their investment targets. The Investment Company Act of 1940 resolved this not by restricting access but by institutionalizing the asset management function itself.

• In 2008, when the SEC determined that LendingClub’s peer-to-peer loan notes were securities, the company suspended new registrations and restructured as an issuer of SEC-registered notes tied to its loans, eventually listing publicly in 2014.

• In 2012, the crowdfunding industry’s demand for reduced fundraising restrictions led to the JOBS Act and the creation of Regulation Crowdfunding.

What the three cases share is that they did not stop at restricting investor access. They established the legal character of the product, the obligations of the operating entity, the scope of required disclosure, and the allocation of loss. Sustainable growth for new financial instruments requires that market participants be able to predict, in advance, both their rights and their legal responsibilities.

On-chain vaults and DeFi markets face the same institutionalization challenge. The available paths are:

• Full registration under existing securities law.

• Private placement exemptions targeting qualified investors.

• Immutable protocol design that eliminates discretion entirely.

• New regulatory exemptions specific to on-chain finance, such as those proposed to the SEC by Ava Labs and the Solana Policy Institute.

Whichever path is taken, the central task is the same: establishing who makes investment decisions, what disclosures are required, and where liability falls when outcomes are adverse.

6. Compliance Costs as a New Barrier to Entry

The factor that will ultimately determine competitive position in the on-chain asset management market is the capacity to absorb compliance costs structurally and to demonstrate legal accountability.

Because regulators cannot directly control code, the framework that holds human actors legally accountable for the discretion they exercise over it will only become more clearly defined. Regardless of how effectively a firm has positioned itself in the interim, formal registration or explicit exemption frameworks will eventually require every operator to demonstrate the legal basis for its management structure and the boundaries of its liability. At that point, compliance obligations, encompassing KYC infrastructure, legal review, on-chain asset valuation, bespoke institutional contracts, and loss-absorption structures, will cease to be administrative overhead. They will become an independent cost item requiring sustained capital investment.

The internalization of these compliance costs will drive a meaningful reordering of the curator market. Large curators with capital, operating scale, and established institutional relationships will be able to distribute compliance costs efficiently and consolidate their market position. Smaller curators, without the capital to fund independent infrastructure, will face a choice between bearing disproportionate costs and accepting consolidation into larger regulated protocols or distribution channels.

The real value of the grace period that interim strategies have secured will be determined by what is built during it. Those who use this time to design formal registration pathways, identify viable exemptions, and establish clear liability structures in advance will find that regulatory requirements become a source of competitive advantage rather than a barrier. For those who defer, mounting compliance costs will erode profitability and, ultimately, foreclose market participation.

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• The Crypto Market’s Shift: From Narrative to PMF

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Headlines keep breaking about AI agents trading and handling payments on their own. Quietly, though, the crypto wallet industry had already been setting the stage. Right now, more than ten companies are building wallets built specifically for agents. What are they really after, and how big could the payoff be?

Key Takeaways

• When AI agents browse the internet in place of people and purchase goods or information, they end up making thousands of payments worth only a few cents each. Existing card rails cannot support payments this small, so a wallet that can automatically split and send funds according to preset conditions becomes essential.

• Companies such as Coinbase and Binance are building AI wallet infrastructure despite the lack of near-term revenue because doing so secures future customers before AI agents begin transacting at scale. The current phase is about establishing that base of users ahead of actual demand.

• A calculation based on Coinbase shows that rising AI agent usage could generate up to seven times its current revenue.

• Payment records accumulated in a wallet can show whether an AI agent is generating income, which opens the door to lending against future earnings, similar to extending credit to a small business based on its card sales history.

• This remains a stage of possibility rather than proof. AI agents still misfire and execute incorrect payments, rules vary by country and by company, and the legal standing of AI agents remains undefined. As a result, the competition underway is not about capturing revenue today. It is about establishing position years ahead of a market that is expected to take shape.

1. AI Agents Are Becoming Fully Active

Earlier this year, a widely discussed experiment on the prediction market Polymarket gave an AI agent $50 in seed capital and set it loose to trade autonomously, under the condition that it would cease to exist if it could not earn enough on its own to cover its API and server costs. The agent went on to trade successfully, and a range of other agents have since begun trading in similar fashion.

AI agents have yet to become part of everyday life. Still, it is clear that they will see widespread use in the near future.

2. Every Agent Transaction Starts With a Wallet

AI agents have not yet entered everyday payments. Their most active use today is in crypto trading bots operating within the crypto ecosystem, independent of traditional payment rails and focused specifically on crypto trading.

In the future, however, payment will extend to things not yet imaginable today. As covered in a previous report, AI changes the nature of payment itself. Once agents, rather than people, navigate the web directly, the size of individual payments falls sharply. A single API call or a single data query may cost as little as $0.001, or in extreme cases $0.00001.

Moving beyond current wallet usage, sending payments this small automatically, split according to preset conditions and without human involvement, requires a programmable payment system. This is the background behind the emergence of the x402 payment rail, and the wallet is the foundation on which that rail runs.

Current payment rails, however, are designed around people as the transacting party.

Cards are issued to an individual cardholder, run on a chargeback structure in which a person disputes and reverses a transaction when something goes wrong, and assume a fixed fee of tens of cents per transaction. None of this is a problem when a person makes an occasional $20 purchase, but the moment an agent starts sending thousands of payments a second, at $0.001 per API call or $0.00001 per data record, that payment model no longer works economically.

The central question is whether money itself is programmable.

Cards can automate the act of entering payment information, but they cannot be programmed to split, stream, or instantly settle the flow of money based on conditions. On the rails that wallets run on, that capability is the default. Storing payment details on a card only goes as far as executing a human-scale transaction on someone’s behalf. The moment the economy shifts to machines transacting directly with one another, the wallet becomes the only possible starting point.

3. Agents Are a $50 Billion Business

As the table shows, wallet providers span a wide range, from exchanges to stablecoin issuers. Why, then, are such a diverse set of players entering agent wallet infrastructure that carries no clear near-term profitability?

The answer is that these companies are positioning for future revenue and a future business, not today’s. Attaching agent functionality to a wallet now is not a revenue-generating move. It builds the underlying capacity to absorb transaction volume once agents begin generating large-scale activity.

The key point is that AI agents will eventually operate around the clock in a browserless environment, without human involvement. Consider a user who asks an agent to produce a piece of research. As the agent gathers information, it executes a small payment each time it pulls paid data from a different platform. A single instruction from the user can trigger 20 to 30 or more payments within moments.

A request that a person would see as a single, simple action turns into a large volume of payment transactions once it passes through an AI agent.

How this shift in the payment environment could affect corporate earnings can be estimated using Coinbase’s disclosed figures. The calculation uses Coinbase’s 9.2 million monthly transacting users (MTU) as the base, rather than its full base of roughly 120 million registered users.

Combining three variables, adoption rate, number of agents per user, and daily call frequency, produces the following scenario results.

• Conservative scenario (10% adoption, 1 agent per user, 50 calls per day): adds roughly $84 million in annual revenue, an increase of 1.2%.

• Neutral scenario (50% adoption, 2 agents per user, 200 calls per day): additional revenue rises sharply to about $3.36 billion, an increase of 46.8%.

• Aggressive scenario (100% adoption, 3 agents per user, 1,000 calls per day): annual revenue reaches roughly $50.37 billion, about seven times Coinbase’s current total revenue.

What stands out in this comparison is that the gap between the three scenarios widens geometrically rather than arithmetically. Adoption alone rises tenfold, from 10% to 100%, yet the resulting revenue gap widens roughly 600-fold, from $84 million to $50.37 billion.

Because the three variables, adoption rate, agents per user, and daily call volume, multiply together, even a small increase in any one of them produces an exponential rise in the total. As a result, once agents reach mass adoption and user numbers surge, the resulting revenue stream could reach up to about seven times current total revenue.

This is why Coinbase promotes agent wallet infrastructure even without meaningful revenue today. Doing so secures its share of the revenue that an agent-driven era is expected to generate.

4. Toward Agent Neobanking

Transaction data accumulated through wallet infrastructure amounts to more than a simple record. It provides a foundation for new business models, since payment history stored in a wallet can serve as a credit assessment standard that demonstrates an AI agent’s financial standing and performance.

Once this kind of data-driven credit assessment system is in place, wallet providers can extend naturally into next-generation financial services such as revenue-based financing (RBF) built specifically for agents.

Stripe Capital is a representative case of a company that built a new financial business successfully on top of existing payment data. When Stripe launched its lending service, Stripe Capital, in September 2019, it did not rely on outside credit bureaus or extensive loan paperwork. It assessed loan eligibility and limits using only the real-time sales data already flowing through its own payment network for each merchant.

The Stripe case suggests that a company can build a high-value financial business on top of a data pipeline from its existing operations, without a separate sales network or marketing effort.

Agent wallet providers are likely to follow the same expansion path. Steadily accumulating an agent’s revenue data through its wallet creates a basis for advancing operating funds through RBF and generating income as an agent-focused financial platform.

Building this new business line, however, depends on one condition. AI agents must evolve beyond simple payment execution into asset-holding entities that generate their own income, earning enough real revenue to repay what they borrow.

5. This Growth Remains Unproven

The sevenfold revenue growth projected for Coinbase and the expansion into RBF described above are optimistic scenarios that assume agent payments become widespread. The barriers to establishing this in the real economy are substantial.

First, significant questions remain about AI agents’ actual purchase conversion rates and payment reliability. Agents still misfire during autonomous ordering, producing incorrect payments due to hallucination, and payments are sometimes blocked outright when card issuers’ fraud detection systems (FDS) reject the transaction. Actual payment completion rates remain low as a result.

In addition, payment protocols such as x402, AP2, and MPP remain fragmented rather than converging on a single standard, and the absence of clear KYC (identity verification) and financial regulation for AI agents, which are not legal persons, is a further obstacle to market expansion.

The goal for wallet providers today, then, is not short-term fee revenue. It took Apple’s App Store fifteen years to build a $10 billion annual fee market, and it took WeChat Pay seven years to establish its large mini-program ecosystem. Agent wallets are following a similarly long timeline, building out an ecosystem rather than competing for immediate returns.

The competition underway is not about today’s marginal revenue. It is about which company first gains control over data on the flow of funds within the agent economy expected to take full shape five to ten years from now.

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• 2026 Know Your Agent: Agent Identity Infrastructure

• Circle Internet Group (CRCL): The Start of Full Vertical Integration

• Why AI + Blockchain Fails to Gain Traction in the Age of AI

• What AI Services Are Crypto Firms Offering?

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

In the first half of 2026, no single narrative ran through the entire market. Even so, stablecoins, RWA, meme tokens, DeFi, and prediction markets each survived or grew despite the downturn. This report looks at the 2026 crypto market as one that is no longer driven by a single narrative but is instead searching for product-market fit across a diversified set of sectors.

Key Takeaways

• A single narrative once pulled the whole market along. The market now moves according to genuine demand.

• Even in a depressed market, established sectors including stablecoins, DeFi, RWA, and meme tokens have continued to survive.

• In the end, only projects that find product-market fit and generate real revenue from real users will survive.

1. The Narrative-Driven Crypto Market of the Past

In the crypto market, narrative has been the central force that concentrates participant attention and pulls in liquidity. Sectors that drove major market cycles, such as DeFi Summer, were each given a distinct narrative, and the market has repeated a cyclical pattern in which liquidity moves to the next narrative as soon as the previous one fades.

At a broad level, the crypto market has passed through four major cycles in which a single narrative dominated the entire market:

• 2020: DeFi

• 2021: NFT/P2E/GameFi

• 2022: L1/L2 competition

• 2024: Restaking

Among narrative-driven growth stories, GameFi produced the most extreme outcome.

Major traditional game publishers including Square Enix and Ubisoft entered the space, and the gaming sector drew $2.5 billion in inflows in the first quarter of 2022 alone. But sectors that could not demonstrate real product-market fit did not last. Axie Infinity, the sector’s flagship title, saw its average monthly player count fall 99.7%, from a peak of 2.8 million in January 2022 to roughly 8,000 in May 2026. It is a clear example of how quickly a narrative built mainly on justification and capital can collapse.

2. The Narratives Consumed Last Year

As covered in our previous report, 2025 marked the peak of this pattern of narrative consumption. After the AI agent narrative, a new one emerged nearly every month, and the pace of rotation kept accelerating.

On the surface this looked highly wasteful, but it is hard to deny that this rapid churn of narratives was what kept retail investor attention engaged and, in doing so, became a core driver of the market as it stands today. Even so, the market’s underlying demand for these past narratives was directed at the token itself rather than at the problem the product was meant to solve.

3. Innovation in Supply Without Demand

One example illustrates how most past narratives developed.

A decentralized social media project appears, framed around the problem that existing platforms monopolize revenue and leave creators inadequately compensated. It presents a vision of lower fees and of returning content ownership and revenue to creators.

1. Token rewards: early participants receive token rewards, and as stories spread of people earning income simply by being active on the platform, market interest grows.

2. User inflow and expansion: similar projects follow, issuing tokens around a minimum viable product and drawing users in through airdrops and liquidity incentives, and the ecosystem’s market capitalization and trading volume expand quickly.

3. Stalled product development: the token price and the scale of rewards start to outpace the product itself. Once fundraising and the initial distribution are complete, development and user growth stall, and the original problem of creator compensation remains unresolved.

4. Liquidity exit: there was never a large enough user base that felt this problem acutely, and the capital that had flowed in was chasing price appreciation rather than the product, so once the narrative peaked, liquidity and users left just as quickly.

This pattern repeated across several narratives, and the market eventually came to recognize that innovation in supply without underlying demand carries little meaning. It began to confirm that only projects generating real revenue and holding onto a stable user base mattered, and it became clear that only projects demonstrating genuine product-market fit would survive.

4. 2026: The Era of PMF That Creates Demand

Where past narratives built and supplied solutions without underlying demand and tried to manufacture demand afterward, the PMF era works the other way around: products are built to match demand that already exists among customers. The market is moving toward genuine products in which user numbers and revenue grow alongside the product and the brand, rather than one in which only token market capitalization rises.

The five sectors covered here were selected based on three criteria: usage indicators such as trading volume and revenue over the first half of 2026, the trajectory of new players entering the space, and growth in market capitalization. These criteria matter because they are difficult to manufacture artificially, all at once and over a short period.

The sections below trace the problem each sector originally set out to solve and the direction in which its leading players are now expanding.

4.1. Stablecoins: From a Volatility-Free Payment Instrument to Cross-Border Settlement Infrastructure

Stablecoins are tokens pegged to the value of fiat currency and used as a means of payment and settlement. The category’s market capitalization stands at $304.2 billion, close to its all-time high of $321 billion.

• Tether(USDT): market cap of $184.08 billion, monthly settlement volume of $1.79 trillion (up 63% month over month), $10.2 trillion in cumulative settlement over the past 12 months, more than $10 billion in net income in 2025, and $141 billion in Treasury holdings.

• Circle(USDC): market cap of $73.25 billion, the default stablecoin across major exchanges such as Coinbase and institutional settlement channels.

Stablecoins started out as a way to trade crypto without exposure to volatility. Their role has since broadened to cross-border remittances and on-chain payment infrastructure.

Growth is now taking more varied forms. In June 2026, more than 140 traditional companies, including Visa, Mastercard, Stripe, Coinbase, and BlackRock, announced OUSD (Open USD, from Open Standard) as a consortium. Non-dollar stablecoins pegged to national currencies such as the Korean won, the Japanese yen, and the euro are also becoming more common. Their combined market cap remains small at $1.2 billion, but the number of wallets holding them grew thirtyfold, from 40,000 in January 2023 to 1.2 million in March 2026.

Stablecoins are no longer just a fixed-value payment instrument. They are evolving into settlement infrastructure that operates independent of borders and time zones.

4.2. DeFi: Built to Replace Banks, Now Part of Financial Infrastructure

DeFi refers to smart-contract-based finance that enables lending, trading, and derivatives without a centralized intermediary.

• Aave: market cap of $1.397 billion, TVL of $14.53 billion, annual revenue of $119 million, the leading DeFi lending protocol.

• Morpho: market cap of $1.302 billion, TVL of $7.497 billion, annual revenue of $0 (its $222 million in annual fees goes entirely to lenders), briefly overtook Aave in market cap from late May through June before Aave regained the lead in July.

• Uniswap: market cap of $2.287 billion, TVL of $3.14 billion, annual revenue of $850 million, the leading decentralized exchange with $2.66 billion in 24-hour trading volume.

• Hyperliquid: market cap of $13.47 billion, TVL of $6.07 billion, annual revenue of $874 million, accounting for about 76% of the perpetual futures DEX category’s market cap and roughly 20% of DeFi overall, with an on-chain perpetuals market share as high as 70%.

DeFi began in 2020 on the decentralized premise of returning the profits earned by intermediaries such as banks to users directly.

Today, it persists less on that ideology than on institutional demand for on-chain financial infrastructure. Morpho and Aave provide the vault risk management and lending infrastructure institutions want, Uniswap supports trading in the assets institutions want to trade, and Hyperliquid supports trading in traditional assets rather than crypto alone.

Each has moved in a direction somewhat different from its founding ideology, but it was precisely this willingness to pivot decisively toward real demand that allowed these protocols to survive and grow.

4.3. RWA: From Democratizing Traditional Assets to Efficiency

RWA refers to the tokenization and on-chain distribution of traditional real-world assets such as Treasuries and private credit. The category’s market cap is $65.2 billion, with tokenized Treasuries the largest subcategory at $13.4 billion.

• Ondo Finance: TVL of $3.52 billion, ONDO market cap of $1.75 billion, a leading provider of tokenized Treasury infrastructure.

• BlackRock BUIDL: AUM of $2.4 billion, with no market cap in the conventional sense since it is a NAV-linked fund token, the largest single tokenized Treasury fund.

• Maple Finance: SYRUP market cap of $218 million, with $4 billion in private credit AUM, exceeding BlackRock BUIDL.

RWA set out to bring traditional asset management on-chain in order to improve settlement speed and accessibility. Its initial customer base was not institutional. The sector began with synthetic asset exchanges that used the fact that on-chain markets sat outside existing regulation to lower the barriers to trading real-world assets. Today, however, institutions make up the sector’s largest user base.

Tokenized equities are a development worth watching closely. Adoption by traditional institutions such as Securitize and the DTCC is increasing. In July 2026, the DTCC began live trading of tokenized securities with more than 50 institutions, and Securitize listed its own shares, SECZ, on the NYSE while simultaneously issuing tokenized shares across multiple chains, including Avalanche and Solana. Centralized exchanges such as Binance (bStocks) and Kraken (xStocks) are also expanding their tokenized equity offerings across various countries. The tokenized equity category’s market cap reached $2.3 billion in mid-July 2026, nearly double its level since first crossing $1 billion in March.

Trading volume for these assets on decentralized exchanges remains minimal compared with DeFi, and most collateral use still relies on permissioned, whitelisted structures. Deeper on-chain integration, comparable to DeFi’s money-lego composability, will likely take more time. For now, the sector is still in the stage of proving the usefulness of on-chain asset management.

4.4. Prediction Markets: From Simple Betting to a Market-Leading Trend

Prediction markets are on-chain contract markets in which participants bet on the outcomes of real-world events. The category’s market cap is $9.58 billion, the most recently formed of the five sectors covered here.

It is also worth noting that the two platforms that actually dominate the sector, Kalshi and Polymarket, do not yet have tokens.

• Kalshi: has raised $2 billion in cumulative funding at a $22 billion valuation, an 11x multiple on funding raised. Its June trading volume of $31.5 billion (up 87.4% month over month) already exceeds that valuation.

• Polymarket: has raised roughly $1.6 billion in cumulative funding at a $9 billion valuation. June trading volume on its main platform outside the U.S. reached $10.26 billion (up 45% month over month), and annualized revenue has exceeded $1 billion since it gained approval to operate in the U.S.

The World Cup was both an opportunity and a challenge for prediction market platforms. It drove a sharp surge in trading volume through June, but after the final on July 19, combined open interest across the two platforms fell nearly 20% from its early-July peak of roughly $2 billion. Since sports contracts accounted for roughly 80% of total trading volume during the tournament, volume is likely to stay soft until the next major event, the U.S. midterm elections.

Regulatory risk also remains active. On July 21, 2026, a Washington state court issued a preliminary injunction barring Kalshi from selling sports event contracts on the grounds that they constitute illegal gambling under state law.

Before 2024, prediction markets did not even exist as a distinct category. Today, they are the fastest-growing segment of the crypto market. What sets this sector apart is that its growth has been demonstrated not through token market cap or TVL, but through real trading volume and revenue generated by drawing users from outside crypto into the on-chain ecosystem. This stands as one of the clearest examples to date of blockchain technology becoming part of everyday use for a broad audience.

4.5. Meme Tokens: From Simple Speculative Assets to a Liquidity Bootstrapping Strategy

The last sector is meme tokens. Unlike the other sectors discussed above, meme tokens have no clear utility. Their value comes from community and attention. The category’s market cap is $25.68 billion, larger than that of prediction markets.

Dogecoin ranks first at $11.22 billion, followed by Shiba Inu at $2.5 billion. Together, these two tokens account for 53.4% of the entire meme token category’s market cap, showing that once a token claims a symbolic position within the sector, even loosely, it tends to hold that position.

Pump.fun and CASHCAT are highlighted here not for their market cap ranking but for their symbolic significance.

• Pump.fun: market cap of $806 million, notable for raising $600 million in its public sale in July 2025 in just 12 minutes.

• CASHCAT(Robinhood chain): its market cap rose more than 2,100% within a week of launch, peaking above $200 million before falling roughly 75% from that peak to $59 million by July 17.

As the Robinhood chain case in July 2026 shows, meme token narratives can still momentarily pull in liquidity across an entire chain, a pattern seen in past cycles. The Robinhood chain’s TVL expanded sharply, from $17 million on July 3 to $312 million on July 13, and daily DEX trading volume climbed as high as $846.8 million on July 10, driven largely by the meme token $CASHCAT.

The practical value of meme tokens lies in attracting early users and easing onboarding. A new chain or application can use a meme token to build a community quickly and naturally encourage activity such as bridging assets or trading on a DEX. Some of the users drawn in this way go on to use other DeFi services or applications within the ecosystem and stay active there, making the meme token an effective entry point and marketing channel.

In the end, meme tokens function less as long-term holdings and more as an initial tool for quickly bringing together users and liquidity. Whether that early attention can be converted into genuine product usage and lasting retention within the ecosystem is what determines success or failure.

5. What It Takes for a Project to Survive

The projects that have survived to this point have secured genuine demand that brings users back repeatedly, and they have demonstrated it through clear performance indicators such as trading volume, TVL, and fee revenue.

Demand in the 2026 market is concentrated at two distinct ends of the spectrum. At one end is speculative demand seeking high volatility and immediate rewards. Meme tokens, perpetual futures DEXs, and prediction markets absorb this demand effectively through rapid trading cycles and high capital turnover. At the other end is genuine financial demand for the stable custody, transfer, and efficient management of assets. Stablecoins, RWA, and DeFi infrastructure are fulfilling these core financial functions of payment, collateral, yield generation, and risk management.

Real product-market fit forms when a sustainable revenue structure and network effects are added to this base. A token’s price can generate initial attention, but long-term survival is determined by usage frequency, retained capital, revenue, and operational capability.

KBW, taking place in late September 2026, will offer a close view of this shift as it unfolds. Bo Hines, CEO of Tether U.S., Jeff Yan, co-founder of Hyperliquid, Johann Kerbrat, SVP of Robinhood Crypto, and Christine Moy of Apollo are among the leading figures driving these changes who will appear on stage together. Through conversations with key leaders in stablecoins, perpetual futures DEXs, and asset tokenization and RWA, attendees will be able to see firsthand the shift that has so far only been visible in the data.

Tiger Research is the exclusive research content partner for KBW 2026.

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Much of the attention remains fixed on stablecoin issuance, but the greater opportunity lies beyond it. Together with EastPoint, we analyzed the key opportunities across the five-stage value chain: on-ramp, transfer, payment, and yield.

Key Takeaways

• Beyond the limits of an issuance market where Tether and Circle hold an oligopoly, this report analyzes the actual business structures that arise across the value chain’s five stages, including on-ramp, remittance, payment, and yield generation.

• Rather than “building the system anew,” the mainstream strategy, as with Stripe’s acquisition of Bridge, layers stablecoin efficiency (instant settlement, low-cost remittance) onto already-established traditional financial infrastructure. Yield generation, however, is an area traditional finance has difficulty accessing, and requires separate expertise.

• As rate cuts reduce the appeal of issuance revenue and competition intensifies, the market’s value is shifting toward the “underlying settlement layer.” Rather than replacing traditional finance, stablecoins show a pattern of vertical integration with the regulated financial system.

1. Time to View the Full Stablecoin Value Chain

Discussion of the stablecoin industry has so far been concentrated on the issuance stage. The performance of major issuers such as Tether and Circle, along with regulatory responses by country, has been treated as the market’s key indicator, but this is only the starting point of the stablecoin value chain.

The stablecoin industry’s full value chain includes the economic “flow” through which tokens circulate after issuance. It is defined as a five-stage value chain: issuance, followed by on-ramp, transfer, payment, and yield generation.

Analyzing the industry from this value chain perspective makes clear that while the issuance market has an oligopoly structure held by a small number of players, the downstream layers that follow it involve a larger number of competitors creating market opportunities.

2. Issuance to Yield: Tracking $1,000

Consider how the $1,000 in Ryan’s bank account circulates through the stablecoin ecosystem. Understanding this requires examining the five-stage value chain in order, from issuance to yield generation.

1. Issuance: Major issuers mint stablecoins backed by collateral such as U.S. Treasuries, supplying the market with sufficient liquidity.

2. On-ramp: When Ryan requests conversion of his $1,000 into stablecoins through an on-ramp service, the on-ramp provider processes the request and sends the tokens to his wallet. At this point, the asset exits the fiat currency system and converts into on-chain liquidity.

3. Transfer: Ryan sends $500 to family in Mexico to cover living expenses. The transfer infrastructure processes this instantly, and the recipient converts the funds into local currency to spend.

4. Payment: Ryan then uses the remaining $200 to pay at a grocery store. Here, the payment infrastructure carries out settlement instantly.

5. Yield: The final $300 remaining in his wallet is not left idle. Instead, it is deposited into a yield protocol’s vault, where it is managed as a financial asset that generates returns.

Through this process, Ryan’s $1,000 converted from fiat currency into stablecoins and evolved into a cross-border means of payment and asset management. Every layer through which Ryan’s funds moved corresponds precisely to the stablecoin industry’s value chain.

2.1. Issuance

The issuance market is an economies-of-scale market, with barriers to entry built on trust and liquidity. Established first-mover issuers, Tether and Circle, hold an oligopoly, and later entrants require a differentiation strategy that moves beyond the reserve-interest model.

1) Industry Structure

Stablecoin issuance is the process of minting and burning tokens against reserves, primarily U.S. Treasuries, to fix their value. The total market is approximately $300 billion, of which dollar-pegged assets account for 99.99%. Tether and Circle together hold roughly 83% of the market, and an economies-of-scale dynamic has become entrenched in which deeper liquidity increases both trading convenience and trust.

As the industry matures, functions once monopolized by a single issuer are undergoing specialization and unbundling. An issuer may appear to be a single entity on the surface, but internally, four functions, licensing (regulatory qualification), reserve management and custody, token minting and burning, and distribution, are divided among separate parties. Through this process, issuers are distributing much of their actual operational responsibility.

Circle, for example, delegates a substantial share of distribution to Coinbase, and Tether entrusts much of its reserves to the custodian Cantor Fitzgerald.

2) Business Model Types

• Reserve Interest: Revenue comes primarily from returns on reserve management, an advantage for leading issuers with large liquidity pools (Tether, Circle).

• Payment Fee: Revenue comes from fees generated when the token is used for payment and settlement. Profitability is determined by transaction velocity rather than market cap (StraitsX).

• Issuance-as-a-Service: Instead of issuing tokens directly, providers lease infrastructure and licenses and collect a spread. Growth comes through network effects rather than scale (M0, Paxos, Bridge).

• Regional: Providers secure exclusive liquidity by moving first into regions without clear regulation or into non-dollar currency markets (KRWQ, JPYC).

3) Case Study: Circle

When institutional clients deposit dollars into Circle Mint, Circle’s on-ramp and off-ramp platform, Circle mints USDC at a 1:1 ratio. Because Circle’s primary revenue comes from interest earned on these deposits, it charges no separate minting fee at issuance, and the core of its operation is maximizing the size of this interest-free float. The deposited dollars are held in the Circle Reserve Fund, an SEC-registered money market fund managed by BlackRock, along with cash and cash equivalents, and are invested primarily in short-term U.S. Treasuries.

Circle distributes this interest income through agreements with its distribution channels. Under the Collaboration Agreement signed in August 2023, Circle and Coinbase split interest earned on USDC reserves as follows:

• USDC held on Coinbase’s platform: Coinbase receives 100% of the interest income generated on the corresponding reserves.

• USDC held on Circle’s own platform: Circle keeps 100% of the interest income generated on the corresponding reserves.

• USDC held outside both platforms (residual interest income): interest earned on reserves backing USDC that circulates outside both platforms, including third-party exchanges, individual and institutional wallets, and DeFi, is split 50:50 between Circle and Coinbase.

This reflects a deliberate strategy. By carefully structuring on-platform and off-platform incentives with its core distribution partner, Circle shares part of its issuance revenue in exchange for maximizing USDC’s distribution base and share of the ecosystem.

4) Key Implications

Stablecoin issuance is an economies-of-scale market where the advantages of having entered early and the scale of available liquidity are decisive, making entry barriers extremely high for latecomers pursuing a direct issuance model. New entrants should therefore focus on the value chain’s functional unbundling rather than becoming fixated on issuance itself.

A more effective strategy is to build unmatched expertise in a specific layer of the value chain, such as licensing, asset custody, settlement infrastructure, or distribution channels, and establish a position as irreplaceable middleware that other players cannot substitute. The nature of future competition, in other words, will come down not to who issues the largest volume of stablecoins, but to which players capture value within the full flow through which stablecoins move and are consumed, and secure a strategic position there.

2.2. On-ramp

On-ramp revenue comes from fees and spreads charged on transaction volume. The fee a consumer actually experiences varies widely by payment method, running 2-4% for bank transfers and 4-7% for cards, but the net take rate providers actually capture is approximately 3%, based on Banxa’s figures. The conversion function itself is difficult to differentiate, and competition is intense enough that aggregators exist to route transactions to the lowest-cost option.

1) Industry Structure

This layer consists of on-ramp services, which exchange fiat currency for tokens, and wallets and custody providers, which hold the resulting assets. The two are closely linked, since one handles conversion into stablecoins and the other handles their storage.

On-ramp revenue comes from fees and spreads tied to transaction volume, and margins vary considerably by payment method. The conversion function itself, however, is difficult to differentiate, so multiple providers compete with largely similar offerings, and net take rates are converging around 3%.

2) Business Model Types

• Consumer On-ramp: Provides currency conversion directly to end users and collects transaction fees and spreads. Since differentiation is difficult, competitiveness comes down to license coverage, the breadth of payment networks, and reputation, reflected in conversion rates (MoonPay, Ramp Network, Banxa).

• B2B White Label: Embeds on-ramp rails into wallets and apps and shares a per-transaction fee, approximately 1%, with partners. This secures distribution without a consumer-facing brand, and the deeper the integration with a large partner, the more switching costs function as a moat (Transak).

• Aggregator: Routes transactions across multiple on-ramps to find the optimal path and earns an intermediation fee. Its value grows as the number of individual on-ramps increases, although dependence on its partner network is also a limitation (MELD).

3) Case Study: MoonPay

MoonPay is a non-custodial on-ramp platform where users buy tokens with fiat currency and have them sent directly to their wallet. Its primary revenue comes from per-transaction fees and trading spreads, which range from 1% for bank transfers to 4.5% for cards, with a minimum of $3.99 on small transactions. The published fee structure is organized into three tiers, which reflect how MoonPay allocates revenue and structures distribution.

MoonPay’s revenue structure splits into two channels: direct traffic and embedded transactions through partners. Its model of embedding the solution into more than 500 wallets and apps, in particular, lets partners set their own rates and functions as the core driver behind MoonPay’s ability to secure large-scale distribution efficiently while sharing revenue with those partners.

4) Key Implications

Fee revenue from simple on-ramp services faces severe margin pressure as the service becomes commoditized and price competition intensifies. Building a sustainable business therefore requires converting a one-time fee structure into steady, recurring revenue.

Consumer on-ramp providers are accordingly expanding into downstream layers of the value chain, such as issuance and settlement infrastructure. MoonPay’s acquisition of Iron and its move into branded issuance services are examples of this shift, though the financial results of this recurring-revenue strategy have yet to be verified.

The “embedded” strategy, in which providers integrate their services into a larger platform, has produced two distinct outcomes. Some providers build independent competitive strength and remain a standalone moat (Transak, Turnkey), while others are acquired by larger payment and custody companies, as with Privy’s acquisition by Stripe and Dynamic’s acquisition by Fireblocks.

It is too early to determine which outcome will become the dominant pattern, but the on-ramp and wallet layer clearly plays a pivotal role within the industry.

2.3. Transfer

Transfer is the layer responsible for the movement of stablecoins. It includes transfers by individuals and businesses, as well as payroll payments to global workforces.

This segment draws attention because it demonstrates stablecoins’ cost advantage in its most concrete and measurable form. Traditional cross-border transfers cost an average of more than 6%, while using stablecoins substantially reduces that cost.

1) Industry Structure

Fees and FX spreads arise at both ends of the process, converting dollars into tokens and tokens back into local currency, but the on-chain movement of the tokens themselves is effectively free.

Revenue, in other words, is concentrated not in the transfer itself but in the conversion at both ends and in the licensing required to process transfers legally. Because obtaining a Money Transmitter License (MTL) in individual U.S. states takes 12 to 24 months, leasing the license itself as infrastructure, a “compliance-as-infrastructure” model, has become a powerful revenue model.

2) Business Model Types

• Cross-Border B2B Infrastructure: Orchestrates cross-border payments and settlement between businesses, typically earning a transfer fee (on the order of 5–10 bps) plus an FX spread (tens of bps up to around 1%, depending on corridor and volume). Some go further and issue their own stablecoins to capture reserve interest income as well, as with Bridge’s Open Issuance (Bridge, BVNK, Conduit).

• Payroll: Specializes in salary payments and owns the end relationship with both workers and employers. On top of SaaS subscription fees (a flat monthly rate per contractor, with off-ramp fees of about 25 basis points), this model layers a second revenue stream by investing float, funds awaiting payroll disbursement, and capturing the interest, as with Rise Earn (Rise, Toku).

• Consumer Transfer: A model that specializes in person-to-person cross-border transfers, uses stablecoins to lower backend costs, and expands its own margin by maintaining a flat fee cheaper than legacy providers (Félix Pago).

3) Case Study: Rise

Rise is a stablecoin payroll platform through which companies pay wages in either fiat currency (USD) or USDC. Workers select their own payout method each pay cycle from more than 90 local currencies and stablecoins, and more than half of recent withdrawals, out of a cumulative $1.5 billion processed, have been made in stablecoins. What Rise actually charges for, however, is not token transfer but management of the employment relationship. The platform automates KYC and AML screening, generates country-specific contracts, and issues tax documents, and charges recurring fees for this service.

Rise’s revenue builds in three layers that follow the flow of payroll funds.

• Subscription and Transaction Fees: Employers choose between a flat $50 monthly subscription per contractor or 3% of the payment amount, plus a $2.50 transfer fee per transaction. Because payroll recurs by nature, this revenue is recurring rather than one-time.

• Assumption of Legal Liability (EOR/AOR): A premium offering in which Rise itself becomes the legal contracting party and absorbs the risk of worker misclassification. Employer of Record (EOR) service costs $399 per worker per month. The eightfold price gap versus simple payment processing comes from compliance liability, not the transfer function.

• Float Management (Rise Earn): Rise invests funds companies have set aside before payroll disbursement, as well as USDC balances workers have not yet withdrawn after receiving payment, in Aave lending pools on Arbitrum. It charges no deposit or custody fee and instead takes a 1% commission on the interest generated, collected at the time of withdrawal (launched March 2026).

Because payroll is a cash flow that recurs every month without exception, balances naturally accumulate on the platform both before disbursement and after workers receive but don’t withdraw their funds. Rise’s three-layer structure monetizes exactly this characteristic. In an environment where on-chain transfer is effectively free, this can be read as a deliberate strategy of expanding the charging point sequentially, from the employment relationship (subscription) to legal liability (EOR) to idle funds (yield), rather than charging for movement itself.

4) Key Implications

The winner in the transfer market will not simply be the provider that moves tokens most cheaply. It will be a comprehensive player that secures conversion and licensing at both ends (Mural Pay, Yellow Card) to control the customer touchpoint, owns the substantive customer relationship through payroll (Rise), and layers yield income (Rise Earn) on top of that.

The eventual acquisition of cross-border infrastructure provider BVNK by the card network Mastercard, for up to $1.8 billion, illustrates that the settlement infrastructure underlying the transfer and payment layers will converge into one.

2.4. Payment

Payment is the value chain’s core layer, where stablecoins settle payment for goods and services. Merchant payments and card services are leading this segment, but the economic reality remains immature relative to market expectations. On-chain stablecoins’ retail velocity remains at only about one-twentieth of M1, a measure of the money supply, because users load funds and spend them intermittently rather than following the routine financial cycle in which payroll receipt and regular spending are interlocked.

1) Industry Structure

Interchange, the fee card networks and issuers collect on each transaction, is the core source of payment revenue and scales with payment volume. Low turnover, however, keeps per-card profitability weak, and what revenue exists is split among the card network, the issuing bank, and the payment gateway (PG). The real profit pool therefore sits not with the consumer-facing card brand but with the card issuance and settlement infrastructure behind it.

Most consumer card providers lack their own issuance authority and depend on this infrastructure, leaving them with a limited revenue structure built mainly on swap spreads.

2) Business Model Types

• Payment Infrastructure: Orchestrates merchant payment and settlement. Beyond payment fees, providers capture reserve interest income by issuing their own stablecoins. Stripe’s Bridge Open Issuance, which distributes to businesses the same reserve revenue structure Circle has captured, is one of the most profitable businesses in this layer (Stripe, BVNK).

• Card Issuance Infrastructure: The backend that supports corporate card issuance. Providers receive a share of interchange fees through principal membership in major networks such as Visa, and generate revenue through program management and FX spreads. The core point of differentiation is USDC-based T+0 on-chain settlement, which cuts collateral requirements by up to 60% compared to existing methods and substantially improves capital efficiency (Rain, Reap).

• Consumer Card and Neobank: Provides cards and accounts to end users. Revenue combines a share of interchange and FX spreads with membership subscription fees or margin from managing deposited funds. Because these providers are not issuers themselves, their access to reserve interest is limited, and most depend on issuance infrastructure such as Rain or Reap (Cypher, KAST).

• Card Network: The network for payment authorization and settlement. Interchange belongs to the issuer, while the card network benefits from rising transaction volume through a per-transaction network fee. Card networks are incorporating stablecoin settlement as a backend layer, which strengthens lock-in with partner banks (Visa, Mastercard).

3) Case Study: Rain

Rain is B2B backend infrastructure that helps wallets, exchanges, and neobanks issue their own branded consumer cards. Partners design card programs through a single API integration, and Rain, as a principal member of Visa and Mastercard, handles network sponsorship, compliance, and issuance and operations on their behalf.

When a user swipes a Rain-based card at a merchant, processing follows this sequence:

• Authorization (real time): The payment is authorized on the Visa or Mastercard network just like any standard card. The experience for both merchant and consumer is identical to a conventional card, and stablecoins remain invisible on the surface.

• Balance Deduction and Ledger Management: The user’s on-chain balance is converted and deducted in real time for the authorized amount, and Rain manages the ledger for the entire program.

• Network Settlement (daily): Rain settles with the card networks entirely in USDC. Because settlement isn’t constrained by bank cutoff times, it occurs every day of the year, including weekends and holidays, so payment funds from weekends and holidays aren’t held up for days.

• Fund Recovery and Working Capital: In a credit structure, user repayment arrives later than settlement, so the issuer has to fund that gap. Rain tokenizes card receivables and uses them as collateral for on-chain loans, raising settlement funds before it collects from users, with cumulative borrowing and repayment exceeding $175 million. As a result, its collateral requirement is up to 60% lower than that of traditional issuers.

In short, when a consumer uses a Rain-based card, Rain is the one handling everything behind the scenes, from authorization through settlement and funding.

4) Key Implications

The core of payment revenue is not the visible card payment fee but the reserve interest that comes with issuer status and the capital efficiency gained through T+0 settlement. Most consumer card brands are merely the front-end customer touchpoint layered on top of this infrastructure.

Major card networks have moved to directly acquire cross-border payment infrastructure such as BVNK, while Visa, Mastercard, Stripe, and Google are pursuing a joint stablecoin coalition, Open USD. This reads as a vertical integration strategy, bringing the platform in-house to defend their exclusive reserve interest income.

2.5. Yield

Yield is the value chain’s endpoint, and the layer where the most sophisticated business structures form. The interest that issuers are unable to pass on to holders ultimately returns to users here, and this lending business is evolving into a full asset management industry.

1) Industry Structure

Early on-chain lending combined all assets into a single large pool, so that a default in any one asset could spread as risk across the entire system. This structural limitation has since been addressed by the introduction of an isolated, or modular, model that keeps collateral and loan terms separate by market, clearly dividing the core infrastructure, the immutable lending protocol, from the yield-management layer, run by risk curators.

This structural separation gave rise to a genuine on-chain asset management industry. Risk curators, like traditional asset managers, earn performance fees, up to 50%, and management fees, up to 5% annually, on the vaults they run, and the top four players together control roughly 65% of total curating TVL, the total value locked across all vaults, giving this segment an oligopoly structure.

On top of this yield infrastructure sits a layer of financial products that end users actually consume, including real-world asset (RWA) products that tokenize U.S. Treasuries and private credit, interest-bearing synthetic dollars, and restaking.

2) Business Model Types

• Lending Infrastructure: Captures a portion of the interest spread between deposits and loans, the Reserve Factor, or takes protocol revenue from interest generated by issuing its own stablecoin, such as Aave’s GHO. A different model, exemplified by Morpho, turns off its own protocol fee and instead redirects that value to downstream curators and the token ecosystem to grow the network (Aave, Morpho).

• Risk Curator: Designs asset allocation and risk models on top of lending protocols and collects a vault management fee. Steakhouse, for example, manages approximately $1.7 billion in assets with a team of fewer than 20 people and takes about 5% of the interest generated. It exemplifies the on-chain asset manager, an operating model whose cost structure is far more efficient than that of traditional financial institutions (Steakhouse, Gauntlet).

• RWA Yield Vault: Issues and distributes tokenized U.S. Treasuries or money market funds (MMFs) and earns a management fee of roughly 0.15% to 0.5% annually. BlackRock’s BUIDL serves as the underlying asset, Ondo Finance repackages it for the decentralized finance (DeFi) ecosystem, and Plume Nest distributes it through a Layer 1 blockchain built specifically for RWAs (BUIDL, Ondo, Nest).

• Interest-Bearing and Synthetic Dollar: Generates returns through delta-neutral basis trades or a managed-rate net interest margin (NIM), then pays that return to token holders as interest. This category divides into two types, models that rely on crypto-native derivatives yield and models that rely on stable Treasury collateral (Ethena, Sky).

• Restaking: Makes already-staked assets liquid again, a process known as restaking, to capture additional yield. Some providers take this further, vertically integrating across the value chain, from collecting DeFi vault management fees to linking directly with consumer card payments (Ether.fi).

3) Case Study: Steakhouse

Steakhouse Financial is a risk curator, a type of on-chain asset manager. Rather than building its own lending protocol, it operates on top of existing infrastructure such as Morpho, taking on a sub-advisory role: selecting collateral assets, designing risk parameters such as loan-to-value ratios, and allocating capital across markets.

Its revenue structure also resembles traditional asset management, collecting a portion of the interest generated as performance and management fees. Because lending protocols such as Morpho handle the operational infrastructure, accounting, settlement, and custody, curators can scale their operations efficiently on risk-design expertise alone, without bearing separate infrastructure costs.

4) Key Implications

The assets currently managed by on-chain curators, approximately $7 billion, amount to roughly one twenty-thousandth of the global traditional asset management market, approximately $147 trillion. This wide gap represents a long runway for the on-chain asset management market to expand.

High yields, however, only matter if the underlying system remains stable. Several recent depegging incidents and a chain of shocks across the restaking sector have exposed operational risks and tail risk, extreme scenarios that fall outside normal expectations, which simple smart contract audits alone cannot detect.

Capital in the market is therefore shifting from high-yield synthetic dollars to Treasury-collateralized products with comparatively lower returns, because what institutional investors fundamentally want is not a high annual percentage yield (APY) but predictability, the ability to control risk.

3. Where the Stablecoin Value Chain Is Headed

Success in the stablecoin market depends not on scaling issuance alone, but on which player controls a specific customer segment. Building infrastructure from scratch in a crypto-native way, however, is slow and carries a heavy cost burden.

The most realistic and executable strategy is to layer stablecoin efficiencies, such as same-day settlement, 24/7 operation, low-cost transfers, and programmable yield, onto already-established traditional financial infrastructure (rails). Recent major M&A activity, including Stripe’s acquisition of Bridge and Mastercard’s partnership with BVNK, all point toward this combination of traditional financial infrastructure and stablecoin efficiency.

This opportunity is being amplified by two broad trends working together: the spread of regional currencies and convergence with regulated finance.

• Spread of Regional Currencies: Governments and institutions preparing stablecoins denominated in their own currencies are more likely to adopt already-proven issuance infrastructure and local banking corridors than to build a system from the ground up.

• Convergence with Regulated Finance: Regulated financial institutions such as JPMorgan, Visa, and BlackRock also show a clear preference for proven infrastructure over developing their own technology.

As a result of these trends, the market opportunity in card issuance and settlement, custody infrastructure, and asset management, the gateway institutional finance must pass through to enter the market, is set to expand further going forward.

This is because stablecoins function essentially as money and serve as a powerful “technological upgrade” that maximizes the efficiency of existing financial rails.

The issuance market is an oligopoly that requires substantial capital and trust, while the layers that follow issuance, including on-ramps, payments, and asset management, carry comparatively low barriers to entry, allowing a much broader range of business models to emerge.

Because this market is still at an early stage where integration with traditional financial rails is just beginning, the players that come to dominate it will be determined by what form of integration and replacement they lead.

This shift has become an unavoidable, large-scale challenge of the era. EastPoint: Seoul 2026, taking place on September 28, will serve as a forum for an in-depth discussion of this industry-wide shift. With traditional financial institutions and the digital asset industry gathering under one roof to cover the stablecoin ecosystem and beyond, the event is positioned as a substantive first step toward genuine convergence across existing boundaries.

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Read more reports related to this research.

• 2026 Asia Stablecoin Market Overview

• Stablecoin Issuance Market: Four Business Models Reshaping the Market

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Capital in the crypto market is undergoing a paradigm shift, concentrating into specific sectors and companies. Tiger Research and RootData examined this shift in capital markets using data on 9,416 investment deals recorded from 2018 through the first half of 2026.

Key Takeaways

• Capital inflows in the first half of 2026 reached $13.3 billion, already comparable to the $13.2 billion recorded for all of 2024, even as the number of funding rounds fell to just 435, a 78% decline from the 2022 peak of 1,978.

• The market is now split between a small number of large, crypto-native venture capital firms that concentrate on lead investments and exchange-affiliated venture arms that compete on liquidity, while mid-sized firms without a clear competitive edge are being pushed out of the market at a rapid pace.

• The number of funding rounds in the gaming sector fell 96%, from 141 in 2024 to just 5 in the first half of 2026.

• Capital inflows into the payments and stablecoin sector and the centralized exchange (CEX) sector were driven entirely by mergers and acquisitions.

• Traditional financial institutions took part in 54.5% of all investment deals recorded in the first half of 2026.

1. The 2021 Market: Speed and Diversification as Strategy

The core strategy in the 2021 crypto investment market was speed and portfolio diversification. Investors executed 1,750 deals that year, including seed rounds, and competition over speed was intense enough that AU21 Capital alone closed more than 13 deals a month on average.

Investment decisions at the time were reduced to simple criteria such as the token generation event (TGE) schedule and tokenomics, the structure governing how a project’s tokens are issued and distributed. Because token issuance alone could generate returns without any real product development, venture investors largely pursued a “spray and pray” strategy, spreading capital across dozens or even hundreds of projects regardless of valuation.

Speed of execution took priority over thorough due diligence. New rounds closed almost instantly, and VCs that missed a round often chased the next one at a higher valuation, a pattern of FOMO that repeated across the industry.

Many VCs that ran this strategy did not survive the bear market that followed, while the ones that did survive fundamentally changed their approach.

2. Which VCs Survived: A Changed Landscape

2.1. Lead Investment, Then and Now

The first metric to examine is lead investment, the rounds that major VCs have historically directed.

Some VCs remain active in leading deals today, while others have disappeared entirely or emerged only recently. Because leading a round has always required the reputation and scale of capital that only large VCs possess, the firms that led major rounds in the past have proven resilient, and most still rank among the top ten today.

2.2. How Surviving VCs Diverged

Looking at data from 2024 through 2026 as the most recent period, crypto-native VCs and established large firms are concentrating their resources on lead investments, engaging more deeply in individual deals. They have shifted their business model toward doing fewer deals overall while raising the bar on due diligence and securing board seats and greater influence over governance.

A different pattern emerges, however, in the cumulative count of round participation outside of lead investments.

Among the top 15 VCs by round participation from 2024 through the first half of 2026, exchange-affiliated firms account for a large share. Exchanges have been more active in joining rounds than in leading them. Coinbase Ventures ranked first with 140 deals, OKX Ventures second with 94, and YZi Labs third with 92. YZi Labs is the organization that resulted when Binance Labs rebranded in January 2025.

HashKey Capital, ranked seventh, is the venture arm of the Hong Kong exchange HashKey Exchange, and Mirana Ventures, ranked fourteenth, is the venture arm of Bybit. Five major exchanges appear in the top 15 through their respective venture arms alone. Large VCs that focus on leading rounds, such as Polychain and Pantera Capital, rank lower by this measure of overall round participation.

CEX-affiliated VCs have established themselves as core participants in major rounds by leading with the liquidity and marketing support their platforms can provide. Mid-sized VCs that lack a clear, defensible advantage, whether economies of scale, brand recognition, or exchange-level liquidity support, are being squeezed out of the market quickly as capital pressure and failed exits reinforce each other.

2.3. The VCs That Left: The End of Spray and Pray

Most VCs that built broad portfolios during the last bull market by relying on quick token liquidation have since disappeared. AU21 Capital, LD Capital, and Shima Capital saw their deal counts fall by as much as 98.9% and effectively lost their influence in the market. A strategy built on riding short-term narratives no longer worked once a prolonged bear market and tighter regulation set in.

Their failure to develop any real differentiation was the main cause, but it is also worth noting that the broader flow of crypto capital has shifted toward projects that have already reached some degree of maturity, and few new projects requiring early-stage funding are emerging. In other words, the kind of opportunity these VCs depended on has stopped appearing in the market.

3. Investment Rounds: Buying the Fruit, Not the Seed

3.1. The Seed Collapse

Seed-stage deals totaled 81 in the first half of 2026, down 88% from 694 in 2022. The market’s aversion to early-stage projects with unproven business models and higher risk is clearly evident. This decline also shows up in the overall structure of funding rounds: seed rounds accounted for 35.3% of all deals in 2022, a share that fell to 18.7% by the first half of 2026.

The decline in seed rounds can be read as reflecting both investor aversion and a simple shortage of new early-stage projects seeking seed funding. It is a metric that captures market contraction and market maturity at the same time.

3.2. Capital Concentrating in Later Stages

Measured by capital allocation, later-stage rounds, Series A and beyond, now account for 75.2% of total investment. Seed-stage investment briefly held a majority share during the 2023 bear market, but capital quickly reallocated toward well-capitalized companies once the market entered recovery.

In the first half of 2026, total Series A funding ($745 million) exceeded all seed-stage capital raised ($423 million), making it the largest category of any round.

Average deal size rises in a clear step pattern from one stage to the next: $5.4 million at seed, $22.4 million at Series A, $127 million at Series C, and $202 million at Series E. The sample size shrinks at later stages, but .companies that reach those stages have already seen their revenue and valuation increase, so each round involves a correspondingly larger amount of capital.

4. The Market Overall: Capital Concentrates as Deal Count Falls

4.1. Capital and Deal Count Diverge

Total capital inflows reached $13.3 billion in the first half of 2026, while the total deal count of 435 amounted to only 22% of the 1,978 deals recorded in 2022, the year with the highest annual deal count. From 2024 to 2026, capital volume held steady or rose even as it concentrated into a much smaller number of deals.

Small, diversified bets from VCs chasing short-term returns around token liquidity events have declined, while large direct investments from traditional financial institutions have increased. Institutions apply stricter criteria, evaluating not token listing schedules or market narratives but whether a company has an auditable revenue structure and the necessary regulatory licenses.

Deals of $100 million or more totaled 32 in the first half of 2026, accounting for 7.4% of all deals, up sharply from 1.1% in 2024. Over the same period, the average deal size roughly quadrupled, from $11.7 million in 2024 to $47.4 million in the first half of 2026.

This rise in share came from two directions at once. The number of large deals itself increased, while the total deal count fell as small deals, including seed rounds, disappeared. A small group of surviving projects began to dominate the market, and as small deals vanished, the already limited pool of large deals also came to represent a larger relative share.

4.2. Direct Participation in Venture Rounds

The share of investment deals involving traditional financial institutions rose from 29.2% in 2018 and first crossed the majority mark, reaching 53.9%, in 2021. Their participation dipped to 45.2% in 2023 during the last downturn, rebounded to 54.4% in 2024 as regulation became more defined, fell back to 50.9% in 2025, and reached 54.5% in the first half of 2026. Participation has remained near its highs ever since first crossing the majority mark in 2021.

In one example, a16z led the $355 million round for Digital Asset, the developer of Canton Network, but core institutional players, including BNP Paribas, HSBC, S&P Global, and Hanwha Investment & Securities, invested directly rather than through a venture subsidiary.

Where investment once entered mostly at the earliest stage, the growth of crypto VC firms and the entry of traditional investors have shifted more capital toward companies that have already reached some degree of maturity.

5. Sectors: Surviving a Changed Environment

2024 was the year spot bitcoin ETF approval coincided with a more favorable regulatory environment, producing the first clear sector-level capital flows since the bear market, and this analysis uses it as the baseline year for sector comparisons.

In 2024, the year bitcoin ETFs were approved, the infrastructure sector held a majority share of total investment capital at 50.9%. That share had fallen sharply to 14.8% by the first half of 2026. Payments and stablecoins (25.3%), centralized exchanges (18.2%), and prediction markets (17.5%) took the lead instead, reshaping the sector landscape entirely.

This shift suggests that blockchain infrastructure has changed character, from a standalone investment target to a practical platform that institutional businesses put to use. Representative examples include Robinhood running its own layer built on Arbitrum, and Securitize adopting Solana and Avalanche as settlement layers around the same time it listed on the New York Stock Exchange. In other words, the current capital market’s core demand has moved past building new protocol infrastructure from scratch, toward actually operating real-world financial services on top of existing infrastructure layers.

5.1. The Laggards: Gaming, NFTs, and Social

All three sectors saw deal counts fall sharply. Gaming dropped from 141 deals to 5, NFTs from 27 to 2, and social and entertainment from 74 to 11.

Capital inflows followed the same downward path in all three. Gaming capital fell from $758.6 million to $44.8 million, NFT capital from $114.9 million to $14.7 million, and social and entertainment capital from $512.1 million to $70.1 million.

Gaming showed the steepest decline of the three. The earlier GameFi model, which combined gaming with token-based rewards, tended to lean too heavily on token issuance for financial returns rather than building sustainable gameplay. As soon as new user growth slowed, this model fell into what is known as a death spiral, a structural cycle in which falling token value and user attrition reinforce each other, and it never found a way out. As a result, user traffic data, once a key metric in due diligence, lost its reliability, and capital inflows into the sector were effectively cut off.

5.2. DeFi: Quiet but Steady

Deal count in the decentralized finance (DeFi) sector fell 71%, but total investment declined by only about 34%. Average deal size actually rose, from $4.5 million in 2024 to $10.4 million in the first half of 2026, showing that as overall deal count contracted, capital concentrated in a small number of large deals.

The main driver of this concentration was a token sale round by the lending protocol Morpho, aimed at institutions and investment firms. Morpho, which used its modular lending protocol to open the DeFi vault market to institutions and redefine DeFi risk standards, raised $175 million in a token round led by a16z crypto, Paradigm, and Ribbit Capital on June 9, 2026. That single round accounted for 17.7% of all DeFi investment in the first half of 2026, a clear reflection of how concentrated the market has become.

The DeFi sector, in other words, has moved away from broad-based ecosystem growth, with capital instead shifting toward a small number of protocols that the market has already validated.

5.3. Payments and Stablecoins: The Fastest-Rising Sector

Deal count in the payments and stablecoin sector has kept accelerating on a monthly average basis. Total investment over the same period jumped roughly twentyfold, from $143.9 million to $2.85 billion in the first half of 2026. Much of this increase, however, is attributable to a handful of large M&A transactions.

The largest deal in the first half of 2026 was Mastercard’s acquisition of BVNK for $1.8 billion in March, followed by Payward’s (Kraken’s parent company) acquisition of Reap for $600 million in May. These two transactions alone accounted for about 84% of total sector investment in the first half of 2026. Cross-border payment and crypto card issuers, including Rain ($250 million) and KAST ($80 million), also raised capital steadily, supporting the sector’s growth.

These recent large-scale M&A deals indicate that traditional payment companies and major Web3 institutions have moved beyond simple business partnerships and are now acquiring and directly controlling stablecoin infrastructure. Stripe offers the clearest example of this race to set the ecosystem standard, beginning with its acquisition of Bridge in October 2024.

After acquiring Bridge, Stripe partnered with Paradigm to build Tempo, a blockchain dedicated to stablecoin payments, and successfully launched its mainnet in March 2026. That June, Bridge co-founder Zach Abrams became interim head of the entity operating Open USD (OUSD), a global consortium stablecoin project with more than 140 participating companies.

The OUSD project has adopted Bridge, which Stripe acquired and continues to develop, and Tempo, which Stripe is building, as its core initial infrastructure. The technology and talent Stripe gained through acquisition now control both pillars at once: its own proprietary platform and the industry consortium meant to set the standard. This shows that competition over stablecoin infrastructure has moved fully past company-level acquisitions and into a contest over setting the global standard for the entire market.

5.4. CEX: Venture Capital No Longer Needed

The centralized exchange (CEX) sector’s share of total investment jumped from 3.0% in 2024 to 18.2% in the first half of 2026. This increase, however, is difficult to read as an expansion of traditional venture investment into new exchanges, since M&A alone accounted for 75.5% of all CEX sector investment recorded from 2024 through the first half of 2026. That share climbed from 58.8% in 2024 to 78.9% in 2025, reflecting an overwhelming degree of concentration.

Overall capital inflows declined from the prior year’s peak of $19.4 billion, when large M&A deals were concentrated, but remained more than six times the 2024 level of $340 million. Deal count has not slowed either, holding a steady pace on a half-year basis. The 23 deals recorded in the first half of 2026 averaged 3.8 per month, faster than the pace of 2.8 per month in 2024 and 3.0 per month in 2025.

What the CEX investment market is showing, in other words, is a reshuffling centered on a small number of large operators. Naver’s acquisition of a stake in Dunamu remains under regulatory review but was the largest deal announced during the period, followed by Coinbase’s acquisition of Deribit for $2.9 billion and Kraken’s acquisition of NinjaTrader for $1.5 billion.

Abu Dhabi’s sovereign wealth fund MGX’s $2 billion strategic investment in Binance fits the same pattern. At the same time, venture arms of existing large exchanges, such as OKX Ventures and HashKey Capital, are participating more actively in investment rounds and acquisitions of their own. As a result, CEX players are increasingly taking on a dual role, acting as both investment targets and strategic investors.

5.5. Prediction Markets: A New Sector Emerges

Prediction markets have emerged as a sector that provides liquidity for real-world macro indicators such as economic data, elections, and policy decisions. The trigger for the sector’s growth was formal regulatory approval from the Commodity Futures Trading Commission (CFTC) in May 2025, which opened the door for large-scale capital inflows from hedge funds and asset managers as the sector entered the regulated mainstream.

Kalshi surpassed $100 billion in cumulative trading volume in June 2026. It had already raised $1 billion in a round led by Paradigm in December 2025, followed by another $1 billion led by Coatue.

Polymarket raised capital from Intercontinental Exchange (ICE), the operator of major traditional exchanges. In October 2025, ICE committed up to $2 billion, of which it actually deployed $1 billion, and it added another $600 million in March 2026, bringing its cumulative investment to about $1.6 billion.

Rather than a field of many competing new projects, the prediction market sector is settling into a structure in which traditional financial institutions and top-tier institutional capital repeatedly funnel large rounds into the two players that secured regulatory approval first.

5.6. Custody: Quiet but Powerful

The custody sector grew fifteenfold, from $20.4 million in 2024 to $317.1 million in the first half of 2026. In the first half of 2026, Anchorage raised a $100 million strategic investment, meaning Anchorage alone accounted for roughly a third of all sector investment during that period.

For institutional asset managers to hold crypto directly, custody infrastructure that meets regulatory requirements is essential. This sector grew alongside rising institutional demand for asset management and crypto custody services.

The sectors discussed above share one common thread: each has kept a stable base of capital flow through the funding rounds described here, and in every case, that infrastructure demand was created by institutions’ need to enter the market.

6. A New Standard for Crypto Capital: From Betting to Control

Overall, the center of gravity in crypto investment has shifted from planting short-term seeds to owning a stake in infrastructure and protocols.

Before bitcoin ETF approval and the improved regulatory environment of 2024, the crypto market was a realm of indiscriminate betting, dominated by small, narrative-driven investments spread across many projects. That strategy ultimately led to the collapse of the gaming and NFT sectors and the elimination of the VCs that kept pursuing it.

Today’s capital, by contrast, aims not at short-term bets but at gaining long-term control over both its investment targets and on-chain infrastructure. It concentrates large sums in a small number of targets that have secured auditable revenue structures and regulatory licenses, or it acquires equity outright to control the infrastructure itself.

In the past, an investment in an early-stage project functioned as a signal a VC sent to the market. The act of investing was read as smart money moving in, which lifted token prices or drew retail users to participate early. Today’s structural capital, which acquires infrastructure directly and secures licenses, sends no such signal for retail to follow.

Retail investors no longer react strongly to news of VC investment, fundamentally because market capital itself has undergone this structural change. Retail investors, too, now need to weigh potential investments with the same caution VCs now apply. The old betting strategy no longer serves either retail investors or VCs.

About RootData

RootData is a Web3 asset data platform launched in early 2022 that provides a systematic investment and funding database for crypto investors and founders. It now processes more than 3.4 million search queries a month and is used by more than 2 million crypto users. RootData’s data and research have been cited by major media outlets and institutions, including The Wall Street Journal, Cointelegraph, Binance Research, and The Block. The platform structures the information investors need for decision-making, from discovering crypto projects to tracking funding and profiling investors.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Key Takeaways

• Prediction markets have become a mainstream industry, with $14 billion in monthly volume and Meta’s own “Arena” project signaling recognition from major tech companies.

• The mechanism is simple: a contract settles at $1 if an event occurs and $0 if it does not, so its trading price serves as a real-time probability, and an oracle confirms the outcome after expiry.

• This rests on skin in the game: participants lose money if they are wrong, which lends credibility to the information they provide.

• Western markets have brought prediction markets into the formal system, while Asia’s limited engagement is costing it capital outflow, loss of informational sovereignty, and unprotected users.

• Asia’s task now is not to block these markets but to determine how to use this data responsibly within the formal system, since avoiding the discussion is already ceding leadership abroad.

1. Prediction Markets Have Found Product-Market Fit

Prediction markets stayed largely conceptual for years. That changed around 2020, when a handful of smaller projects began accumulating meaningful trading volume and clearing regulatory barriers one at a time, marking the point at which prediction markets started to take shape as an industry.

Growth has accelerated since then. Monthly trading volume now exceeds $140 billion, and the valuations of the leading platforms have reached roughly $40 billion.

Meta’s entry has made the shift beyond the early stage more apparent. The New York Times recently reported that Mark Zuckerberg is personally leading a team developing a prediction market app called Arena. A large technology company committing resources at this level indicates that the industry has moved past experimentation and established a business model with validated product-market fit.

2. Where Did Prediction Markets Begin?

Prediction markets are not a recent invention. They were used informally in academic and financial circles for decades before blockchain technology brought them to a broader public and helped establish them as an industry.

2.1. Informal Use

The term “prediction market” itself is more recent than its history suggests. Through the 1980s, the concept went by various names, including information market and decision market, before a 2004 economics paper fixed “prediction market” as the standard term.

The underlying practice, however, predates the terminology by centuries. Its earliest form was political betting on election outcomes. In 18th-century London, coffeehouses hosted wagers on parliamentary scandals and changes in the prime minister, with the resulting odds sometimes reported in newspapers. In 19th-century New York, informal futures markets predicting presidential election results operated actively in the curb markets near Wall Street.

2.2. Academic Use

In academia, the starting point was a 1988 effort at the University of Iowa. Three economists, puzzled that opinion polls had failed to predict Jesse Jackson’s win in the Michigan caucus, designed a market where people could trade on election outcomes themselves. This became the Iowa Electronic Markets (IEM).

In 1992 and 1993, the IEM received approval from the CFTC to operate for research purposes. Open to anyone willing to put in $5, the IEM outperformed traditional polling roughly three-quarters of the time between 1988 and 2004, functioning as a working laboratory for aggregating collective judgment into a price. Even so, no regulatory framework existed that would have allowed it to operate as a public market.

2.3. Binary Options

These early prediction markets closely resemble binary options in financial markets: contracts that pay out based on a yes-or-no bet over whether a price will cross a given threshold by a set time. That structure, settling at 1 if the event occurs and 0 if it does not, is identical to the logic underlying prediction markets.

Binary options also found their way into regulated exchanges. The American Stock Exchange’s Fixed Return Options in 2007 and the Chicago Board Options Exchange’s S&P 500-based binary options in 2008 are notable examples. Frequent fraud on offshore platforms led several major jurisdictions to ban retail sales of these products between 2017 and 2021. Despite that setback, the basic contract structure, a binary bet on yes or no, remains the same logic that prediction markets operate on today.

3. How Are Prediction Markets Traded Today?

The range of topics covered by prediction markets today extends to nearly any event imaginable.

Sports draws the largest volume of any category, supported by a continuous calendar of leagues and global events, with the ongoing World Cup currently driving additional interest. Politics, geopolitics, and macroeconomics have expanded beyond indicators such as inflation data to include forecasts of private company valuations, turning information itself into a tradable asset. Cryptocurrency and stock prices, along with smaller gossip-driven events, round out a spectrum that spans both popular interest and demand for specialized information.

Every contract in a prediction market settles on a binary yes-or-no basis. Consider a market on whether J.D. Vance will be the Republican presidential nominee in 2028. If Vance is confirmed as the nominee, the contract pays $1 to those who bet YES. If he is not, it pays $1 to those who bet NO.

The simplest way to understand this structure is to treat one dollar as 100 percent. A contract pays $1, or 100 percent, if the event happens and $0 if it does not, so the price at which it trades in between naturally reflects a probability. A contract trading at 40 cents represents 40 percent of that dollar, meaning the market prices the event’s likelihood at 40 percent, and the cent value can be read directly as a percentage. This reading, however, assumes that spreads and transaction costs are ignored.

Prices form through an order book rather than through any central party. Buy orders, such as an offer to buy at 39 cents, and sell orders, such as an offer to sell at 40 cents, accumulate at each price level, and trades execute where the two sides meet. The price, and by extension the implied probability, emerges in real time from the combined capital of many participants pushing against each other, and traders can sell their position before expiration to lock in a gain or limit a loss, effectively trading their view on an event for money.

Outcomes are recorded through an oracle. However precisely a contract has been priced, someone still has to determine whether the outcome was YES or NO once the event concludes, and the oracle is the mechanism responsible for that determination. In the example above, this is the final step that establishes whether Vance was in fact confirmed as the Republican nominee.

Oracles operate in one of two ways.

1. Decentralized oracle: a proposer posts a bond and submits a proposed outcome, which becomes final if no one disputes it within a set window. If a dispute is raised, the outcome goes through a re-proposal process, and only if a further dispute follows does the matter go to a vote.

2. Centralized: the criteria for judging the outcome are set in advance, and once the event concludes, the exchange applies the official result directly and settles the market immediately. This structure places full authority over the determination with a single exchange.

Limitless, for example, finalizes results according to predetermined rules once the deadline passes. An oracle, a service that reports real-world outcomes onto the blockchain, handles this reporting: for most markets, such as those tracking crypto prices or stocks, the outcome is reported automatically through Pyth Network, while custom markets covering sports or politics are judged manually by the operating team within 24 to 72 hours.

Prediction markets such as Limitless are best understood as an information system that compresses the views of a large number of participants into a single number reflected in price, and that, once an event concludes, determines according to predetermined rules whether that prediction was correct.

4. Skin in the Game and the Evolution Toward Information Finance

Prediction markets have evolved beyond simple betting platforms into core infrastructure for information finance, the conversion of future uncertainty into real-time price information. What fundamentally distinguishes these markets from traditional polling or expert forecasting is the skin in the game mechanism, meaning that participants commit their own capital to the positions they take.

Under conventional methods, an expert who is wrong faces little reputational cost, and opinion polls cannot filter out respondent indifference or strategic misreporting. Prediction market prices carry a real cost for being wrong, since a mistaken position loses money, which pushes participants to verify their convictions against the most objective and current information available. That willingness to bear a cost translates directly into market reliability.

How this skin-in-the-game mechanism plays out in actual data can be seen across several areas.

• Accuracy in financial and monetary policy forecasting: a Federal Reserve economist’s research published in February 2026 illustrates why prediction markets perform well. Since 2022, prediction market rate expectations ahead of FOMC meetings have aligned statistically with actual outcomes, outperforming both fed funds futures and the Bloomberg consensus. The reason is that participants face an immediate loss of capital if they are wrong, which leads them to analyze available information more rigorously and price it accordingly.

• Transparent probability estimates in politics and elections: during South Korea’s local elections in June 2026, Polymarket correctly called the winner in 14 of 16 metropolitan and provincial races. Where exit polls could only describe a race as too close to call, prediction markets offered real-time prices reflecting probabilities that participants had staked their own money on, a result of collective judgment across many participants pricing in a wide range of variables rather than a simple forecast.

• Responsiveness to market events and corporate valuation: when the issue of capping stablecoin interest income emerged in March 2026, prediction markets immediately priced a 97.6 percent probability of a decline in Coinbase’s stock price, functioning as a real-time risk indicator rather than retrospective analysis and demonstrating how sensitively participants respond when their own capital is at stake. Academic research has reached similar conclusions: a 2015 study examining internal prediction markets at companies including Google and Ford found that they reduced forecasting error by as much as 25 percent compared to official forecasting models, indicating that predictive accuracy improves when insider knowledge is combined with capital at risk.

Information asymmetry remains a limitation. A January 2026 case involving Venezuela showed an insider trading on confidential information, exposing a real weakness in these markets. The fact that this attempt to exploit privileged information to distort prices was identified and prosecuted as a crime, however, also demonstrates that the market is designed to operate on a transparent and accountable basis.

In areas where information is broadly distributed, prediction markets function as a precise analytical tool. In areas where information is concentrated among a few participants, they function as a monitoring mechanism capable of identifying that concentration itself. Because participant capital is genuinely at stake, the prices these markets generate constitute objective information relevant to assessing the value of financial assets.

5. Prediction Markets Absent From the Asian Policy Conversation

The character and trajectory of prediction markets differ sharply depending on each country’s regulatory framework. The United States has brought prediction markets into the regulated financial system through judicial rulings, while major Asian jurisdictions have largely continued to treat them as a category of traditional gambling.

In the United States, litigation resolved much of the regulatory uncertainty. The Commodity Futures Trading Commission attempted to classify Kalshi’s election prediction contracts as gambling and sanction the platform, but the court ruled that election prediction is not a game of chance and that the regulator lacked authority to prohibit it. That ruling shifted the regulatory posture and became a decisive catalyst for traditional financial institutions, including ICE, Robinhood, and CME, to enter the market.

In major Asian jurisdictions, by contrast, the prevailing view treats the binary settle-on-outcome structure of prediction markets as equivalent to traditional gambling. The dominant regulatory lens is gambling control and public order rather than financial policy, and while individual countries have taken different approaches, prediction markets remain largely outside formal policy discussion in the region, with India and Indonesia as exceptions.

The divide in how prediction markets are treated ultimately comes down to whether regulators view the market as financial innovation or as a matter for social control.

6. Prediction Markets at the Crossroads of Regulatory Dilemma and Institutionalization

Prediction markets have already become a core part of global financial and information infrastructure. A significant gap has opened between this global trend and the rigid posture of Asian regulators. At a point when the boundary between technology and finance has largely dissolved, attempts to constrain a new market within older regulatory frameworks face inherent limits. The regulatory approach currently followed by major Asian jurisdictions carries three significant problems.

The first is the paradox of regulatory arbitrage.

Prediction markets operate on borderless digital networks, so blocking a platform or restricting users in one country does not eliminate underlying demand. Users instead migrate to offshore platforms outside any regulatory reach, accepting greater risk in doing so. Capital flows out of the jurisdiction, and regulators lose both oversight of the market and the tax revenue associated with it, a dynamic that weakens financial competitiveness in the region over time.

The second is the loss of sovereignty over national information infrastructure.

Prediction markets function as a sophisticated information infrastructure that converts complex social issues into precise numerical estimates, not merely as a venue for betting. Recent elections across Asia have shown prediction markets reading public sentiment faster and more accurately than traditional polling. While these markets are excluded under the banner of regulation, the data that most directly reflects a given society’s sentiment accumulates instead on servers located abroad. The result is an imbalance in which foreign media and institutions gain a clearer picture of a domestic society than domestic analysts do.

The third is the abandonment of user protection.

Users are left in a blind spot with no institutional safeguards. A policy that simply denies the market without sufficient prior discussion only exposes users to risk and pushes them outside the system.

The center of this discussion needs to shift entirely.

The question is no longer how to block this market but how to make healthy use of this data within the formal system. This shift in perspective requires dedicated research, but discussion in this area remains limited so far.

In this space, Limitless Research is filling that gap by processing prediction data from Asian markets such as Korea and Japan into information assets. More participants will need to take on this role of building a healthy data ecosystem going forward.

Regulation should function not as a dam that blocks the flow but as a channel that directs it correctly.

What Asia needs now is not stricter enforcement but the start of a forward-looking discussion that responds to this shift. Pushing transactions that are already taking place into the shadows is the worst possible policy. Bringing this activity into the formal system through constructive discussion, establishing a transparent oversight system, and returning the data generated in the process as a national and social asset will require sustained effort

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Disclaimer

This report was partially funded by Limitless. It was independently produced by our researchers using credible sources. The findings, recommendations, and opinions are based on information available at publication time and may change without notice. We disclaim liability for any losses from using this report or its contents and do not warrant its accuracy or completeness. The information may differ from others’ views. This report is for informational purposes only and is not legal, business, investment, or tax advice. References to securities or digital assets are for illustration only, not investment advice or offers. This material is not intended for investors.

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Key Takeaways

• The RWA market is growing rapidly, but many jurisdictions still lack adequate regulation. Financial institutions in those jurisdictions must make a strategic choice among waiting for domestic legislation, using a regulatory sandbox, or entering a foreign market.

• International RWA operations demand a high degree of precision. Thorough preparation is required across six core areas before entry, covering jurisdiction selection, licensing, asset definition, investor scope, and the design of settlement and operational arrangements.

• The central objective is to build real operational experience by choosing the path that fits the situation. The two main options are direct entry into a jurisdiction with established regulation and a technical route using on-chain native platforms.

1. Wait, Experiment, or Go Abroad

As of the first half of 2026, the real-world asset (RWA) tokenization market has grown to roughly $25 billion to $36 billion. It has drawn the attention of institutional investors by demonstrating clear efficiency gains through tokenization, including automated interest payments and redemptions, shorter settlement periods, and a broader customer base.

Financial institutions nonetheless face a practical obstacle in the regulatory vacuum. Although nothing explicitly prohibits tokenization, the legal framework needed to give distributed-ledger records binding legal effect remains underdeveloped, leaving investor rights without adequate protection. In response, financial institutions have converged on three broad strategies.

• Waiting for domestic legislation: This is favorable for risk management but carries a significant risk of losing the chance to secure an early market position.

• Using a regulatory sandbox: This allows limited experimentation but is confined to areas such as fractional investment and does not scale to the issuance of standardized securities.

• Entering foreign markets first: This means issuing digital bonds in jurisdictions where regulation is already in place, demonstrating results there, and building a track record offshore early to establish a competitive position.

Because the RWA market is inherently a global business, building operational capability across varied regulatory environments is essential. International expansion involves real practical constraints, but financial institutions in jurisdictions that still lack regulation have all the more reason to begin accumulating hands-on experience in foreign markets ahead of their peers.

2. Tokenization Is Not Magic

International RWA operations are not the product of isolated decisions. The choices involved form a chain, where the outcome of each step determines the path available at the next. Tokenization is not magic: it is a process of migrating existing financial instruments onto new infrastructure, and that process demands a higher degree of precision than traditional issuance, not a lower one.

Before committing to entry, institutions should assess their own readiness honestly against the following six requirements.

• Establishing an offshore base: The institution must determine how it will use key jurisdictions such as Hong Kong, Singapore, or the United States, and whether it will work through an existing entity, establish a new one, or partner with a local firm. A new entity offers greater control but requires significant resource investment; a partnership allows faster entry but limits how deeply the institution can internalize core capabilities.

• Licensing: The institution must satisfy the licensing requirements of the jurisdictions where it intends to sell. The choice is between direct acquisition, which takes time and capital, and leveraging the license of an existing platform, which is faster but requires structuring the issuance to fit that platform’s specifications.

• Defining the asset: The choice of what to tokenize determines the height of the entry barrier. Standardized securities such as bonds have well-established structures and are relatively straightforward to bring to market, while non-standard assets such as real estate or trade receivables require considerably more time for legal review and structuring.

• Defining the target investor: The typical approach is to target all jurisdictions except the United States. Selling to non-US investors allows the issuer to rely on Regulation S for an offshore exemption, but including US investors triggers separate requirements such as Regulation D, adding structural complexity. Beyond this, many STO and RWA platforms restrict sales to accredited or institutional investors, so the sales strategy must be set at the same time as the investor perimeter.

• Settlement currency and payment flow: The institution must decide whether to accept settlement in local currency, US dollars, stablecoins, or wholesale CBDC. This is not simply a choice of currency: it determines investor accessibility, custody structure, and ultimately revenue. Accepting stablecoins, for instance, introduces conversion requirements and the potential for additional costs.

• Other operational requirements: Depending on the structure, a wide range of additional considerations apply, including blockchain selection, custody, on-chain operations, and post-issuance governance. In particular, the institution must confirm who controls interest payments and redemptions, registry management, and the ability to force-transfer or freeze tokens in the event of an incident, all of which parallel the operational requirements of traditional financial instruments.

Tokenization is not magic. Even after a structure is complete, the work is not finished until the securities are sold and investors are found.

3. Where to Operate

Jurisdiction selection is a strategic decision that requires weighing regulatory fit and operational efficiency at the same time.

For institutions that already have an offshore presence, however, the most efficient starting point is to assess that existing jurisdiction first. If the primary objective of an offshore tokenization strategy is to accumulate hands-on experience early, establishing a foothold in an entirely new jurisdiction imposes a high threshold in terms of time and capital.

• Hong Kong: Regulatory completeness and enforceability
  Hong Kong is the most advanced first-mover market in terms of implementation. Security tokens are regulated within the existing Securities and Futures Ordinance framework, and an April 2026 SFC circular permitted secondary trading on licensed virtual asset exchanges, completing the link between issuance and distribution. Infrastructure such as HSBC Orion is already operational, and policy support is strong, including HKMA subsidies for issuance costs. Institutions should note, however, that if legislation introducing new virtual asset dealer and custody licenses proceeds as planned during 2026, compliance with any transitional provisions will require attention.

• Singapore: Precise framework and regulatory clarity
  Singapore applies the Securities and Futures Act strictly under the principle of “same activity, same risk, same regulation.” MAS revised its tokenization guidelines in December 2025 to provide clearer guidance, and the Variable Capital Company (VCC) structure makes asset segregation straightforward, making Singapore well suited for fund structuring. The jurisdiction does, however, impose stringent licensing requirements even for services directed at offshore customers, and the entry threshold is high.

• United States: Regulatory clarity and an efficient path to market
  The joint SEC-CFTC interpretation issued in 2026 has clarified the asset classification framework. Obtaining licenses directly as an issuer remains costly, but working through a vertically integrated platform such as Securitize allows efficient issuance under the Regulation D exemption for US accredited investors and the Regulation S exemption for offshore investors. BlackRock’s BUIDL fund is the most prominent example of this approach.

Each jurisdiction has established platforms that can accelerate local entry. These are licensed operators that provide integrated access to regulatory coordination, investor networks for fundraising within the platform, and the operational infrastructure covering the full lifecycle from issuance through settlement.

When assessing entry into a specific jurisdiction, meeting with the leading local platforms to test business feasibility is strategically more efficient than working through extensive regulatory documentation first.

4. Bypassing the Jurisdiction

Where the previous section covered the direct approach of establishing a legal and physical presence in a specific jurisdiction and obtaining the necessary licenses, this section addresses a fundamentally different method. The on-chain native approach designs issuance and distribution from the outset around an on-chain environment.

Rather than investing the time and capital required to secure a physical base, it works with or borrows the structural logic of on-chain platforms that already have regulatory compliance built in, using that infrastructure to reduce the barriers to market entry. Where the jurisdiction-based approach in the previous section asks “where will we operate,” the on-chain native approach asks “how will we structure the deal.”

Representative examples are as follows.

• Ondo Global: Ondo tokenizes US securities through a bankruptcy-remote special purpose vehicle (SPV) incorporated in the British Virgin Islands, using the Regulation S offshore exemption to minimize friction with US securities regulation. It also operates its own secondary market, Ondo Global Markets, to handle trading of its issued tokens directly.

• Plume Nest: Plume’s Bermuda subsidiary, KDAB (Kimber Digital Assets Bermuda), holds a Class M DABA license from the Bermuda Monetary Authority and operates a regulated on-chain vault. Access to the Plume Nest platform is restricted to investors who have passed KYB and KYC screening, and a separate affiliate’s registration as an SEC transfer agent provides a second layer of coverage for ownership registry management and distribution. Tokenization outside the licensed structure is also possible given the platform’s decentralized design, though that path is not well suited to regulated financial institutions.

The structure of an on-chain native strategy closely resembles jurisdiction-based tokenization in substance, but the difference in execution is clear. The primary advantage is speed of entry and breadth of reach: rather than being tied to a specific base, an institution can use already-proven infrastructure to move to market sooner. A further advantage, particularly in contrast to jurisdiction-based platforms whose closed ecosystems can constrain secondary market liquidity, is that on-chain native platforms built around scalability connect organically with DeFi liquidity pools.

The complexity of the structural design, however, is a risk worth considering. The open nature of these platforms allows for a wider range of products, but the established regulatory guidelines that exist for the direct jurisdiction-based approach are absent when it comes to core structural decisions such as issuance design. Because these platforms also operate under structures that differ by platform rather than by jurisdiction, they can create operational burdens for traditional financial institutions, and it is worth assessing whether a local point of contact for the relevant platform is available in the target region.

5. Do Not Wait for Regulation. The Market Will Not Wait.

Large US financial institutions are already leading the market, either by building proprietary platforms or by accumulating direct experience on Canton, Solana, and Ethereum.

For financial institutions in jurisdictions that still lack regulation, launching an offshore RWA business requires redesigning the entire value chain locally, from establishing a base through to distribution. The preparation period typically runs from six months to over a year. The following example traces that process through a mid-sized securities firm, “Firm A,” with an existing Hong Kong entity, tokenizing short-duration investment-grade bonds for sale to offshore institutional investors.

• Step 1: Assessing the existing base and licensing position. The firm uses its existing entity, in this case its Hong Kong subsidiary, to avoid the time and cost of incorporating a new one. Whether the existing license covers tokenization activities is a separate question. Local legal counsel reviews the scope of the current authorization, and where necessary the firm makes a preliminary inquiry to the regulator, here the SFC, to confirm whether a license condition change or additional filing is required.

• Step 2: Selecting a platform and infrastructure. To reduce the time that direct licensing would require, the firm considers working through an established platform such as DigiFT. Vendor due diligence covers the platform’s license validity, the range of supported assets, custody partners, and investor restrictions. At the contract stage, legal review addresses issuance structure design to fit the platform’s specifications, allocation of liability, and governing law.

• Step 3: Regulatory compliance and product design. This step finalizes the product structure of the bond to be tokenized, covering the underlying asset, investor rights, and governing law. The standard approach targets offshore institutional investors outside the United States using the Regulation S exemption. A legal opinion on compliance with local securities law must be obtained for each target jurisdiction. The firm also verifies that its logic for excluding domestic residents is sound under securities law before moving into drafting and approval of the offering documents.

• Step 4: Designing the custody structure and on-chain operations. The firm establishes a dual custody arrangement combining a global custodian bank for the physical asset and specialized infrastructure for the on-chain token. Legal opinions are obtained through external counsel. The firm also finalizes the operational details, including interest payment schedule, settlement currency (US dollars or stablecoins), and redemption mechanics.

• Step 5: Issuance, execution, and verification. The firm executes the actual issuance and sale in accordance with the finalized structure, then confirms that operational procedures such as interest payments and redemptions function as designed. Structural design is the starting point; the business is not complete until investors are secured and the sale is closed.

An offshore tokenization strategy of this kind is not limited to the direct approach of building a base in a specific jurisdiction. Routes such as the on-chain native approach, which navigates around jurisdictional boundaries with greater flexibility, mean that the range of viable paths is effectively open.

Legal review will be the single most time-consuming and costly threshold in any approach taken. Waiting for a complete regulatory framework is not, however, the only answer. The ability to map viable paths quickly and build experience through execution matters more than anything else, because the substance of a tokenization business lies not in technical design but in completing the full sales process.

No one can predict when regulation will be finalized, and the market will not wait. The time to act is now.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Crypto card payments have grown sharply to more than $1.5 billion a month. This report asks whether that marks crypto cards as genuine financial infrastructure or a model that is still maturing.

Key Takeaways

• Crypto cards resemble debit cards just before their 1990 commercialization, since both use existing payment networks to skip the merchant acceptance bottleneck. The primary-account relationship, salary deposits and recurring expenses, remains unbuilt.

• RedotPay alone leads a market of roughly $18 billion in annualized volume, with users concentrated in emerging markets. This makes crypto cards a supplementary tool for underserved, dollar-scarce regions rather than universal financial infrastructure.

• Payment volume growth alone does not secure crypto cards’ place as financial infrastructure. The market will likely be reshaped by who controls the flow of funds, claims regions large institutions haven’t reached, and owns the everyday financial relationship above the infrastructure layer.

1. The 1990 Debit Card Parallel

In September 1958, Bank of America mailed cards to 65,000 residents of Fresno, California. Issued as the first payment card without any supporting infrastructure, it produced a dismal result within a year, a 22% delinquency rate and $20 million in losses. Building the electronic settlement system took 15 years, and the debit card took 17 years to arrive, while Visa’s path to becoming the global standard took 20 years in total.

The largest difference lies in whether an everyday financial relationship has taken hold.

The debit card, which first appeared in 1975, became a core instrument of the primary bank account only in the 1990s, once salary deposits spread in earnest. Today’s crypto card, by contrast, begins with a stablecoin deposit. Most crypto wallets still lack the everyday financial relationships of recurring salary deposits and fixed expenses, which places crypto cards somewhere around the stage the debit card occupied around 1990.

Whoever leads in crypto cards will be determined less by the number of cards issued than by who first builds the account that is used in daily life, or a growth trigger of that kind.

2. $1.5 Billion in Monthly Payments Does Not Yet Signal a Settled Stage

According to Artemis, crypto cards’ monthly payment volume grew from around $100 million in early 2023 to $1.5 billion at the end of 2025, which exceeds $18 billion on an annualized basis. The figure differs somewhat from a simple annualization depending on the scope of on-chain tracking, but the rapid increase in payment volume is clear.

A closer look at the indicators shows a pronounced concentration in particular services and regions. A single service, RedotPay, accounts for more than half of all transactions, and its top countries by web traffic are concentrated mainly in emerging markets, including Bangladesh at 11%, India at 8%, Egypt at 6%, and Nigeria at 6%. The US accounts for only 4%.

Real demand for crypto cards today therefore comes not from mainstream developed markets but from underserved regions with limited dollar access.

The scale gap with established financial networks remains wide. Visa and Mastercard process $24 to $25 trillion in annual payments, whereas crypto cards’ annualized payment volume stands at only about $18 billion. This makes the difference in weight class with the established market clear. .

Indicators of use as an everyday payment instrument are also low. Velocity measures how many times, on average, a given asset is used for payments over a set period, and a higher figure means the asset is used more actively for spending than for holding.

Visa’s tracking of on-chain stablecoin transactions put retail velocity at 0.08, roughly one-twentieth of the 1.65 velocity of standard fiat money (M1). Users are therefore treating stablecoins less as something received like a salary, spent in daily life, and replenished, and more as a balance loaded once and drawn down only occasionally.

Quantitative growth in payment volume does not by itself mean broad settlement in the market. A substantial share of current crypto card volume comes from users in emerging markets with limited access to dollar accounts. For these users, crypto cards do function as a meaningful instrument for everyday finance to some degree.

In developed markets, however, crypto cards have not yet secured clear product-market fit (PMF), nor have they formed the close account relationships that come from recurring salary deposits and automatic transfers.

Considering the inflow paths of funds and the nature of the spending, today’s crypto card is therefore closer to a supplementary tool that serves specific countries’ use cases than to universal financial infrastructure. Building on this growth, however, major players are emerging that are advancing each part of the model.

3. The Major Players Leading the Crypto Card Sector

The crypto card sector divides broadly into four business models, and players compete to establish an early position in different layers. The forms vary widely, from firms that focus on providing back-end infrastructure to models that borrow only the card format while fully differentiating the underlying structure.

3.1. Issuance Infrastructure Model

Visa and Mastercard, the familiar networks, also serve as the payment networks in the crypto card ecosystem. Below them sits the issuance infrastructure layer, which extends down to the consumer card. As shown in the figure above, two structures coexist within the issuance infrastructure layer. The first is the traditional two-tier structure, in which the program manager handling operations is separate from the issuing bank handling membership and settlement. The second is the full-stack issuer, such as Rain and Reap, which compresses the two into one.

A comparison of three program managers that form a two-tier structure together with a bank follows.

Cards that appear to be separate brands on the surface converge on a small number of program managers once you look at the back end. Phantom Card, MetaMask Card, and Gnosis Pay are representative examples.

Card brands such as Kast, Ether.fi, Tria, and Plasma One also appear to be independent services, but in practice they run on a small number of infrastructure providers, as shown above. Rain in particular has most consumer cards connected to it.

Because the issuance infrastructure layer concentrates many brands in this way, traditional neobanks that already hold the relevant expertise are also entering the market.

Nium launched a stablecoin card issuance platform in March 2026 that can issue cards on both Visa and Mastercard. Other traditional fintech infrastructure players include Bridge, which Stripe acquired for $1.1 billion in early 2025, and BVNK, which Mastercard agreed to acquire for up to $1.8 billion in March 2026.

As a result, this layer has become one where full-stack issuers, existing program managers, and newly entering fintechs compete at the same time, and issuance alone is becoming harder to maintain as a barrier to entry.

Rain, for instance, differentiates itself with a daily settlement structure. Where established card companies settle over several days, Rain settles in stablecoins through Visa each day, which speeds up the cash turnover of issuers such as Ether.fi. It recently launched an Agent Control Layer that lets AI agents issue single-use virtual cards programmatically, extending its functions beyond basic card issuance infrastructure.

The issuance models that succeed will be those that go beyond providing payment infrastructure to secure and deliver differentiated functions that traditional infrastructure cannot provide quickly.

3.2. Exchange-Based Model

For exchanges, the card is less a direct revenue source than a tool for preventing user attrition. By connecting a card on top of an existing user base, balances, and transaction data, exchanges aim to keep users from leaving the platform. The actual revenue comes not from card payments themselves but from trading fees, lending, and the management of deposits.

Exchanges aim to use the card as an entry point into a financial super-app. Paying cashback in a proprietary token, however, carries the risk that the effective cashback rate becomes unstable as the token’s price fluctuates.

Switching to stablecoin cashback or interest on balances is cited as an alternative, but in the US, the GENIUS Act’s prohibition on interest payments stands as an obstacle to market expansion.

3.3. DeFi-Based Model

Built on the idea that the wallet itself is the account, this model holds assets directly on-chain rather than custodying them with a centralized exchange, and settles card payments from there. It provides a credit line while assets remain pledged as collateral.

The user, however, must manage a number of items directly, including setting up vaults, managing collateral, and tracking liquidation risk, which raises the cognitive cost involved. This is the main reason the DeFi-based model has formed a limited user base.

The DeFi-based model converts assets in the wallet into fiat in real time at the moment of payment and settles on that basis. Because this process runs on-chain, each transaction incurs gas fees (network fees), and on blockchains with low throughput or high congestion, fees can exceed the payment amount or approval can be delayed.

This is why MetaMask Card adopted Linea, its own layer 2 (L2) network. Cutting per-transaction gas fees to around $0.01 eased the fee burden and processing delays for small payments. Tria’s gasless top-up function takes a similar approach, with the platform covering the gas fee incurred at top-up, which removes the cognitive cost users would otherwise bear in choosing a network and calculating fees.

Until a user experience that satisfies both non-custodial asset holding and payment convenience is simplified to the level of a conventional debit card, however, the user base is likely to remain limited to users already familiar with crypto.

3.4. Stablecoin Neobank Model

This model currently accounts for the majority of crypto card market volume and focuses on the function of the account rather than the card itself. It links foreign exchange, remittance, and savings functions to a stablecoin balance, with the card layered on top as a spending instrument. It holds a strong competitive position in emerging markets where local currency value is unstable, remittance costs are high, and dollar access is limited.

For this model to keep growing, it needs to move beyond an experience equivalent to a prepaid card, in which users buy stablecoins themselves and load the balance.

As the table shows, cashback strategy diverges by market position. RedotPay, with its dominant share, and Revolut, which carries a strong traditional fintech identity, do not run cashback programs at all, while later entrants such as Kast and Plasma One actively push USD or proprietary token cashback to attract users.

Benefits alone, however, cannot sustain crypto cards’ integration into everyday use.

4. A Single Payment Function Is Not Enough

As the precedents of traditional cards and neobanks show, a plain payment service has a clear ceiling on the value and profitability it can generate. These businesses turned profitable only after incorporating structures such as the primary-account concept and the deposit-lending margin into their business models. The crypto card sector now faces the same threshold, but global regulation, including the GENIUS Act in the US and MiCA in Europe, restricts the paths to paying interest and managing assets through stablecoins, which makes finding a breakthrough difficult.

Reading this macro-level pressure in reverse yields three core strategic requirements that crypto card players will need to secure in order to survive going forward.

Players that fail to take direct control of the flow of funds, defend their use case in emerging markets, or build a proprietary account relationship that infrastructure providers cannot replace are likely to fall behind as market standards take shape.

After the introduction of the debit card, the players that ultimately came to lead the market were not those that issued the most cards but those that established an early position in the actual bank account. The crypto card sector today faces the same underlying question.

Crypto card players need to take direct control of the flow of funds upstream of the Visa payment step, secure an early position in niche markets, and capture consumer infrastructure in the way the primary bank account emerged in traditional finance. Doing so means establishing a global standard without an existing precedent to follow.

Crypto cards that fail to do so will remain not an essential element woven into daily life, but simply a prepaid card used by a limited group of people because the rewards happen to be somewhat better.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

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The AI industry continues its upward trajectory with no sign of cooling. The blockchain AI sector tells a different story. Why has it failed to attract comparable attention?

Key Takeaways

• Amid the AI boom, the blockchain industry needs to be evaluated from a demand-side perspective: what problems does it solve that incumbent systems cannot, and what distinct capabilities does it bring to bear?

• Decentralized computing and storage carry legitimate rationales around data sovereignty and cost competitiveness. The barrier is that neither has yet demonstrated a technical advantage compelling enough to justify the switching risk for buyers already committed to existing cloud infrastructure.

• Model verification and privacy technology do not address problems that enterprises feel urgently enough to act on voluntarily. Demand in this category is more likely to follow regulatory mandates than to precede them. The EU AI Act illustrates the pattern: standards come first, and market adoption follows.

• In the agent framework category, the constraint is not technological. Mainstream enterprises remain focused on internal workflow automation, while blockchain projects are already building the infrastructure layer that comes after. Demand needs time to reach the technology.

• Agent payments is the one area where blockchain and traditional finance stand on equal footing. Neither has solved the problem yet, making this the only category in which both sides are confronting the same challenge at the same moment.

• The blockchain AI sector as a whole is not struggling because the combination is incoherent. It is struggling because of a mismatch: each of the four categories faces its own distinct reason why demand has not yet materialized, and only agent payments is currently in a position to compete.

1. Blockchain Projects Left Behind in the AI Boom

The AI industry is experiencing an unprecedented concentration of capital and infrastructure investment. Large language model ecosystems led by major technology companies have become a standard feature of both daily life and industrial operations. Within this rapid expansion, the crypto industry has also been evolving quickly, seeking points of technical connection with AI.

Early efforts centered on supplementing or replicating segments of the traditional AI value chain: decentralized GPU supply, data ownership recovery, and cryptographic verification. More recently, the focus has shifted toward filling gaps that centralized architectures struggle to address, including autonomous on-chain activity by AI agents and real-time machine-to-machine settlement.

Describing this space generically as “AI plus blockchain” obscures more than it reveals. A rigorous demand-side analysis is needed: which problems does each sub-sector target, and does the blockchain-native approach offer a genuinely differentiated solution?

2. What Each Category Does

2.1. Decentralized Computing

The cloud market today is structurally dependent on a small number of major technology companies that control compute resources. High-performance GPUs are both difficult to procure and prohibitively expensive, creating a steep entry barrier for AI startups and research teams that cannot access large-scale infrastructure.

Centralized systems concentrate resources toward the largest buyers, and there is no neutral channel for redistributing the substantial volume of idle GPU capacity that exists across the market.

Decentralized computing addresses this concentration and inefficiency through two approaches. Under a shared-economy model, projects aggregate idle GPU resources held by individuals and small data centers into a unified network, creating a more flexible supply chain outside the incumbent technology monopoly.

Under a distributed computing model, users can access and lease compute resources globally without dependence on any single provider’s infrastructure, raising utilization of dormant hardware and lowering the entry threshold for high-performance compute.

2.2. Decentralized Storage

Current data storage architecture is almost entirely dependent on centralized cloud infrastructure operated by companies such as Google and Meta. When users upload data to these platforms, ownership effectively transfers to the platform, entrenching monopoly control over AI training data. Centralized infrastructure also introduces operational risk: policy changes, service disruptions, or platform failures can cut off data access or result in data loss.

Decentralized storage addresses these structural problems through two approaches. A shared-economy model, exemplified by Filecoin and Arweave, pools idle storage space across individual participants into a network capable of substituting for incumbent centralized cloud.

A permanent storage model replicates data across distributed nodes, ensuring persistence regardless of the operational status of any individual server and reducing dependence on any single platform.

2.3. Data Marketplaces

AI developers require training data, but the current data distribution market operates as a closed system in which large platforms such as Hugging Face and cloud vendors capture the economics and control pricing. Data creators receive little compensation, and the mechanisms for rewarding data collection and contribution lack transparency.

On-chain marketplaces eliminate intermediaries through smart contracts and establish transparent transaction terms. In a direct-trading model such as Ocean Protocol, data owners and AI developers transact directly through smart contracts, with compensation distributed transparently. In a contribution-reward model such as Grass, individuals connect idle bandwidth to AI data collection and receive compensation proportionate to the value of their contribution.

2.4. Model and Inference Verification / Privacy

Conventional AI systems operate as black boxes, providing no external means to verify that a model ran correctly or that sensitive user data was handled securely.

Zero-knowledge machine learning (ZKML) introduces a cryptographic verification layer into AI inference, enabling both privacy protection and auditability. In this architecture, models run off-chain in the conventional manner, but the computation generates a cryptographic proof that the process was executed correctly according to defined rules.

This proof is recorded on-chain rather than the underlying data. To illustrate: in an automated medical insurance reimbursement service, a hospital would submit only a proof that the AI model ran correctly, rather than sharing the full medical record. The insurer can verify the legitimacy of the claim without accessing the original data.

2.5. AI Agent Frameworks

As AI agents become the primary locus of traffic and value creation, they are evolving from tools into autonomous economic actors. The existing financial system was designed around human consumption patterns and is structurally incompatible with a machine-centric payment environment.

The agent economy requires microtransactions, high-frequency settlement, and cross-border payments executed at millisecond speeds, and incumbent financial infrastructure cannot accommodate this.

On-chain agent infrastructure addresses this through two mechanisms. An autonomous execution and control mechanism assigns unique wallets and identities to AI agents, enabling them to sign transactions directly, with configurable spending limits and safeguards to prevent unintended behavior.

A protocol-based settlement mechanism uses stablecoin payment protocols such as x402 to settle microtransactions and high-frequency payments in real time, bypassing currency conversion and approval workflows.

3. Where Blockchain AI Diverges from the AI Value Chain

The AI value chain has formed around the sequential removal of bottlenecks. As AI demand grows, memory shortages emerge, and power and data transmission capacity come under strain. Companies that solve these problems quickly, such as HBM manufacturers and power infrastructure providers, attract enormous capital and substantial market appreciation. The market assigns clear value to solutions that remove barriers to growth.

Blockchain AI projects have identified real problems, yet they have not captured anything like the same level of market interest. If these problems were as urgent as claimed, they would already have driven measurable shifts in the market.

The reason blockchain AI projects cannot attract mainstream capital despite advancing legitimate goals such as reducing GPU concentration and restoring data sovereignty is a pronounced gap between the priorities of the technology suppliers and those of the buyers who control capital allocation.

The AI industry moves on a competitive timeline, and buyers, primarily large technology companies and enterprise clients, invest at scale in whatever resolves their immediate operational bottlenecks most quickly. They do not spend time evaluating unproven infrastructure. Their priorities are computational performance, infrastructure reliability, and demonstrable return on investment.

To illustrate: when data transmission speeds became a bottleneck during model training, substantial capital moved into fiber optic infrastructure as a replacement for copper. When memory bandwidth emerged as the primary constraint, buyers identified it as the critical problem, and SK Hynix and Samsung Electronics gained global prominence by solving it with high-bandwidth memory. The pattern is consistent: capital follows whoever removes the constraint that is actively limiting progress.

The underlying problem for blockchain AI is one of framing. Buyers with large capital budgets are focused exclusively on near-term performance gains and cost reduction. Blockchain AI, by contrast, has concentrated on problems that buyers regard as secondary or future-state concerns.

The technical ambitions of the supply side do not align with the immediate operational requirements of the demand side.

3.1. Technical Limitations

Several projects have used benchmarks to demonstrate the potential and design philosophy of decentralized infrastructure. The more fundamental problem is that this work has not yet produced a technical leap decisive enough to displace entrenched incumbents in the mainstream market.

For a new technology to take share from centralized cloud providers such as AWS or GCP, which already command massive capital and infrastructure, it must deliver a performance advantage so substantial that the gap with incumbents becomes irrelevant.

When Apple transitioned from Intel to M1 chips, absorbing the significant risk of breaking software compatibility, the move was justified by a threefold improvement in power efficiency, a gap large enough to make the transition worthwhile.

Blockchain AI has not yet offered enterprise buyers, who require petabyte-scale data synchronization and ultra-low latency as baseline conditions, a sufficiently clear case to accept the switching risk.

3.2. Demand Mismatch

In decentralized computing, some projects have introduced service level agreements as a risk mitigation mechanism, yet enterprise buyers remain unpersuaded. The reason is structural rather than contractual. Major cloud providers supply controlled, dedicated data centers. Blockchain networks rely on fragmented, anonymous node participation.

If a node drops out and interrupts a model training run worth hundreds of millions of won, no combination of token refunds or financial compensation can recover the opportunity cost and time lost. For enterprise buyers operating on competitive timelines, system stability is not a negotiable parameter.

Even with hedging mechanisms in place, the residual uncertainty is not a risk most buyers have any incentive to absorb.

3.3. Demand Not Yet Formed

Blockchain agent frameworks are designed for sophisticated ecosystems in which multiple AI agents collaborate autonomously, but there is a maturity gap between that vision and the current state of the mainstream market.

Enterprise adoption of AI agents is accelerating, led by companies such as Microsoft and Salesforce, but the current focus is firmly on workflow automation operating within controlled internal networks. The infrastructure that blockchain projects are building addresses the stage that follows: independent AI agents operating autonomously across external networks beyond any organization’s perimeter. Most enterprises today are still focused on establishing the stability and return on investment of the AI systems they have already deployed. Multi-agent collaboration across external networks is not yet a priority on enterprise infrastructure roadmaps.

The limited demand at this stage reflects timing rather than technical failure. This is better understood as a long-range infrastructure investment in anticipation of the agent economy, rather than a near-term revenue opportunity.

3.4. Regulatory Prerequisite

Zero-knowledge proofs and privacy-preserving technology represent core solutions for establishing AI trustworthiness, but practical enterprise demand for privacy infrastructure has been limited in the early stages of AI adoption. Voluntary adoption by enterprises is unlikely to drive meaningful uptake; the more probable path is that regulatory standards create the demand that the technology is then positioned to meet.

The growing specificity of global regulatory frameworks, including the EU AI Act, is a favorable development in this respect. As legal requirements around data provenance and security become concrete, blockchain’s advanced verification capabilities stand to become a compliance requirement rather than an optional feature in enterprise deployments.

Regulatory development in this space is better understood as a catalyst for market formation than as a constraint. Clear regulatory standards reduce market uncertainty, and in doing so, create a stable path through which blockchain AI can establish mainstream demand within an institutional framework.

3.5. Insufficient Use Cases

These structural factors combine to produce a more fundamental problem: the absence of a defining success case that demonstrates value at scale. The traditional AI industry built its current position through the adoption flywheel that ChatGPT initiated, using a concrete, widely visible product to attract the capital and talent necessary to sustain further growth.

Blockchain AI projects have not yet produced comparable evidence of product-market fit at scale. Beyond early community enthusiasm, none has demonstrated adoption at the level of enterprise operations or consumer daily life in a way that commands serious attention from mainstream capital. The absence of a compelling reference case remains the most significant barrier to attracting the conservative institutional investment that would accelerate broader adoption.

4. Does the Combination Have Value?

Blockchain AI has not yet found stable footing in the mainstream AI value chain, independent of market expectations. Does that mean the combination is without merit?

It does not.

The fundamental reason blockchain AI projects are currently overlooked is not that the combination is internally contradictory. It is that a mismatch exists in each sub-category between what incumbent industry requires and what the technology is oriented toward delivering.

The priorities of the traditional AI industry are clear: near-term performance, cost optimization, and rigorous infrastructure reliability. Many current blockchain AI proposals, by contrast, are centered on data ownership, computational transparency, and decentralization.

These are not problems that established industry participants treat as immediate bottlenecks, and pursuing them often requires accepting performance overhead that is too costly relative to the benefit.

Before the AI boom, power infrastructure companies were broadly classified as mature, slow-growth businesses. The data-center-driven surge in power demand changed that, and they have since attracted significant market attention. The current indifference to blockchain AI may reflect a similar lag, the period just before a new paradigm creates the conditions that reveal the value of the infrastructure being built ahead of it.

What matters during this transitional period is how the sector responds to what the market actually requires.

The path forward divides into two directions: adapting actively to the standards of the established AI value chain and closing the near-term performance gaps, or holding to present capabilities while continuing to build the infrastructure that a future generation of AI deployment will need.

The outcome will depend on which of those choices proves more aligned with where demand goes next.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Compliance hiring is growing even as overall crypto hiring declines. What has changed in a market where new postings have fallen sharply?

Key Takeaways

• The crypto job market has not recovered to its 2022 peak. According to Coincub, new crypto jobs reached 66,494 in 2025, a 47% rebound from the prior year, but still below the 2022 high.

• The contraction deepened in 2026, with new postings on major job boards falling roughly 80% year-over-year in January.

• Among 2,932 active postings in H1 2026, engineering ranks first at 34.1% and compliance/legal ranks second at 10.4%. Active postings are concentrated in regulatory compliance and technical development.

• By sector, CEX (30.8%) and stablecoins/payments (13.4%) together account for nearly half of all postings. Gaming and NFTs represent 2.4%.

• In a market driven by token sales, demand was concentrated in community and token sale roles. As the market has shifted toward institutional participation, the ability to manage product operations and regulatory compliance has become more important.

1. The 2021-2022 Hiring Peak and Where the Market Stands Today

The most active hiring period in crypto was the stretch from late 2021 through the first half of 2022. Bitcoin and Ethereum reached all-time highs, NFT trading volumes surged, and DeFi TVL reached hundreds of billions of dollars.

Centralized exchanges expanded aggressively to support global operations. At the time, Coinbase had more than 250 open roles, Kraken more than 300, and Binance more than 600. DeFi protocols and NFT marketplaces absorbed engineers and marketers simultaneously, and the GameFi boom drew game studios into the hiring pool as well. Expansion took precedence over proving profitability.

New postings fell sharply from the second half of 2022 onward. Crypto-related jobs declined roughly 40% between 2022 and 2023 across most countries in North America and Europe. The collapse of FTX in November 2022 deepened the slowdown, and the market has not recovered to its peak since.

To assess the current state of crypto hiring and read market direction from the data, Tiger Research compiled a proprietary dataset of 2,932 active postings as of June 2026. The data was collected through manual tracking of web3.career, cryptocurrencyjobs.co, direct career pages of major firms (Greenhouse, Ashby, and Lever), and Korean local job platforms (Wanted and Jobkorea). DAO contributor roles, freelance positions, and contractor arrangements are excluded.

2. Major Crypto Firms Continue to Cut Headcount in H1 2026

Restructuring had been underway well before the first half of 2026. Consensys carried out layoffs in the second half of 2025, and the trend extended into 2026 across major exchanges including Coinbase, Gemini, Crypto.com, and Kraken.

March saw the highest concentration of layoff announcements in H1 2026, with six firms: Gemini, Crypto.com, Algorand, OP Labs, PIP Labs, and Messari all disclosing cuts in the same month. The first quarter of 2026 brought a combination of rising geopolitical tensions stemming from Iran and broader market weakness, and firms that needed to reset their strategic direction appear to have converged on March as the moment to act.

The stated rationale varied by firm. Algorand cited the macro environment and declining token prices. Crypto.com and Gemini pointed to AI integration. Coinbase announced a pivot toward becoming an “AI-native company.”

For some firms, repeated rounds of cuts ended in an acquisition at a fraction of their former valuation. Messari conducted three consecutive rounds of layoffs beginning in 2023 and was acquired by Blockworks in June 2026 for approximately $10 million. Having once been valued at $300 million, Messari’s trajectory captures the reality of the market in concentrated form.

3. Hiring Is Concentrating in Specific Regions

Crypto remains an industry with a high proportion of remote work. Among active postings in H1 2026, remote positions account for the largest share at 40.2%, or 1,180 postings.

Excluding remote roles, office-based hiring is concentrated in jurisdictions with established regulatory frameworks or limited regulatory unpredictability, including the United States (21.8%), Singapore (5.9%), and Hong Kong (4.2%).

The crypto industry once positioned itself as borderless, but as it has evolved into one that requires active regulatory engagement and local operations, its hiring structure is gradually consolidating around established regulatory hubs.

4. Compliance Roles Are on the Rise

Engineering ranks first among H1 2026 active postings at 34.1%, or 999 postings, indicating that demand for technical development has held up even as the broader crypto market has contracted.

The more notable shift is compliance and legal settling into a clear second place. This category was not tracked as a separate line item in the Tiger Research 2023 Global Crypto Jobs Report, yet within three years it has grown to account for one in ten of all active postings.

The pattern is sharper within exchanges. Among 904 exchange postings, engineering leads with 275 openings (30.4%), followed by compliance and legal at 145 (16.0%) and BD/sales at 61 (6.7%). Compliance postings outnumber BD/sales by a factor of 2.4, suggesting that exchanges are allocating more headcount to regulatory defense than to business expansion.

The compliance hiring trend can be traced in part to the full implementation of the EU’s MiCA framework, which made CASP licensing mandatory as of December 30, 2024. European exchanges and asset managers have been expanding their compliance teams around the same period.

The same dynamic is visible in Korea. Following the implementation of the Virtual Asset User Protection Act in July 2024, domestic exchanges have seen rising demand for compliance personnel. This helps explain why Korea’s share of compliance postings (18.4%) is nearly double the global average (10.4%).

The roles workers most want to see automated are equally clear.

In a survey conducted by CryptoJobsList, content creation and community management were most commonly identified as the functions workers want to see automated. Both involve repetitive tasks and emotional labor rather than high technical complexity, making them candidates for early displacement. Survey data also identifies them as the roles practitioners believe should be displaced by AI agents first. Hiring demand for these functions is declining at the same time that those already in the field identify them as prime automation targets.

5. CEX Dominance and the Rise of the Stablecoin Sector

CEX accounts for 904 postings, or 30.8% of the total, representing close to one-third of all active roles. Major exchanges including OKX (267 postings), Bybit (138), and Binance (135) drive this sector.

Stablecoins and payments ranks second at 392 postings (13.4%). However, Tether alone accounts for 224 of those postings (57.1%), with Ripple contributing a further 104 (26.5%). Together the two firms hold 83.6% of the sector, which means the figures reflect concentration among a small number of large firms rather than broad-based hiring growth across the sector. The second half of the year may look different. With stablecoin-related legislation advancing in the United States, the hiring environment for this sector is expected to shift materially in H2.

Market making and trading has reached 101 postings (3.4%), enough to constitute a standalone sector. Key firms include B2C2, GSR, Keyrock, and Wintermute. This category did not appear as a separate classification in the 2023 report. Its emergence reflects the entrenchment of institutional liquidity provision and asset management within crypto market infrastructure.

Gaming and NFTs account for just 71 postings (2.4%). This sector led hiring across the market during the GameFi boom of 2022 and 2023, but its share has since fallen below that of market making, which was a minor category at the time.

Hiring within the market is no longer driven by cyclical sensitivity. It has consolidated around sectors that emphasize structural stability: exchanges, payments, and regulatory infrastructure.

6. The Crypto Hiring Market After AI Adoption

The AI industry points in the opposite direction over the same period. The PwC 2026 Global AI Jobs Barometer, which analyzed more than one billion job postings across six continents, found that U.S. postings requiring AI-related skills reached approximately 1.12 million in 2025, up 66% year-over-year and representing 2.8% of all postings.

Crypto is following a similar pattern. The share of crypto job postings that mention AI skills rose from 23% in early 2025 to 53.1% by March 2026.

Taken together, AI is generating new roles across industries broadly, while the crypto market is restructuring toward higher productivity with a smaller workforce.

7. Contraction and Selectivity in the Crypto Hiring Market

The global crypto hiring market has not simply contracted in scale; the nature of the work being hired for has changed fundamentally.

The center of gravity has shifted from marketing to regulatory compliance and infrastructure operations. Roles focused on promoting tokens and growing communities, which were prevalent during the bull market, have declined sharply. Demand for people who work with operating systems directly, whether in exchange operations, stablecoin infrastructure, or on-chain risk management, has remained stable or grown.

Conversations with practitioners in the field reflect the same shift. Projects no longer describe themselves as looking for “degen” hires. Having moved past the early stage when few understood the industry, the blockchain sector is now applying the kind of rigorous, exacting hiring standards long associated with traditional finance and fintech.

The changes underway in the crypto hiring market reflect an industry that has passed through a speculative phase and is settling into the institutional mainstream. The market no longer seeks people who build elaborate illusions; it seeks specialists who can construct and demonstrate real infrastructure.

Appendix: Data Sources

Proprietary Data (2,932 postings) — web3.career / cryptocurrencyjobs.co / direct career pages (Greenhouse, Ashby, Lever, Polymer) / manual tracking of Korean platforms / manual LinkedIn sample / collection date: June 18, 2026

External Sources

• LinkedIn, January 2022: crypto job postings up 395% versus 2020

• CFTE, 2022: crypto and Web3 accounted for 67% of new tech hires

• Coincub Blockchain Jobs Report 2023: blockchain hiring in North America and Europe down approximately 40% between 2022 and 2023

• LinkedIn Jobs on the Rise 2026

• LinkedIn 2026 Grad’s Guide: AI Engineer ranked first in growth; U.S. AI postings up 639,000 (AI Engineer up 75,000)

• WEF/LinkedIn 2026: AI created 1.3 million new jobs; AI expert roles exceeded 3% of all LinkedIn postings

• CoinDesk, March 21, 2026 (original data: Up Top, William Burleson): new postings in January 2026 down approximately 80% year-over-year, averaging 6.5 per day

• Coincub Web3 Jobs Report 2025: 66,494 postings, up 47% year-over-year, below 2022 peak

• CryptoJobsList 2026 Web3 Workforce Report: share of postings mentioning AI rose from 23% to 53.1%

• web3.career 2025 Intelligence Report: remote postings down 50% year-over-year

• GENIUS Act: signed into law by President Trump on July 18, 2025

• Tiger Research 2023 Global Web3 Jobs Report

• Official layoff announcements by individual companies (2025–2026)

• Blockworks acquisition of Messari announced June 12, 2026; Surf: layoff data verification

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

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As institutional investors enter the onchain lending market, DeFi is moving away from single shared-pool architecture toward structures that isolate risk and specialize the operational layer.

Key Takeaways

• The Lehman crisis and the Kelp DAO incident both exposed the same structural flaw: a single shared-pool architecture amplifies the failure of one asset into a system-wide crisis.

• TradFi responded by separating each functional layer of the financial stack.

• The DeFi ecosystem is converging on the same answer, a modular architecture built around risk isolation.

• The shift has accelerated as RWA assets begin flowing onchain.

• In a modular architecture, the capability of the operational layer, the layer that actually manages the products, becomes the critical differentiating factor.

1. The Lesson of the Lehman Crisis

In September 2008, the collapse of Lehman Brothers triggered a crisis without precedent, Reserve Primary Fund (RPF), the world’s third-largest money market fund, suspended all redemptions within a single day.

At the time, RPF’s exposure to Lehman Brothers debt amounted to just 1.2% of assets under management. When Lehman’s bankruptcy rendered that 1.2% unrecoverable, the fund’s total asset value fell from 100 cents on the dollar to 98.8 cents. That was enough to break the MMF industry’s foundational principle of maintaining a fixed one-dollar net asset value per share. The fund’s per-share value fell below one dollar to $0.97.

Once principal loss became visible, panic spread almost immediately. The fear that waiting would mean further losses drove a bank run of historic scale, with $40 billion in redemption requests arriving within two days. Unable to absorb the pressure, the fund froze and halted all withdrawals.

The Lehman episode forced a comprehensive restructuring of traditional capital markets. In the MMF sector, risk-tiered liquidity buffers and redemption restriction guidelines were overhauled. In the hedge fund sector, the industry absorbed the lessons of Lehman’s rehypothecation risk, where a single prime broker had concentrated custody over client assets.

The result was a structural shift away from concentrating assets and credit with a single intermediary. Separating execution infrastructure from risk management, and distributing exposure across multiple prime brokers, became the global standard for risk isolation. Built on that institutional safeguard of separating infrastructure from risk to contain contagion, the asset management industry was able to rebuild operational trust and resume its growth.

2. How Traditional Capital Markets Solved This Problem

In 2014, the U.S. Securities and Exchange Commission restructured the MMF framework. Funds were segmented by the nature of their capital, with different standards applied to each category. The purpose was to prevent a bank run or failure in one segment from spreading to other fund types or to the system as a whole, with each category carrying its own dedicated buffer.

The core philosophy behind traditional finance’s approach to risk control is separation. Authority is divided so that risk does not concentrate in a single point, and independent verification is inserted at each stage of the capital flow.

Prime brokerage in capital markets is the clearest illustration of this principle. Investment authority sits with the hedge fund; risk oversight sits with the broker. The two functions are deliberately kept apart. In traditional lending markets, the same logic took hold: credit assessment, underwriting, collateral management, and custody each became the domain of distinct, independent actors.

When asset management and lending began migrating to DeFi, however, the layered intermediary structure that traditional finance had built was compressed into a single layer. Early DeFi protocols focused on eliminating the intermediaries that the separated structure required, encoding the relevant mechanisms directly into smart contracts and automating what had previously been handled by multiple parties.

3. From Shared Pools to Modular Architecture

Early DeFi’s approach of compressing all lending mechanics into a single smart contract reduced intermediary costs, but concentrated every category of risk within a single protocol. Because credit assessment, underwriting, and collateral management operated inside one codebase rather than as separate functions, the failure of a single asset or a liquidation breakdown could directly paralyze liquidity across the entire system.

This potential for contagion forced protocol governance bodies to set risk parameters conservatively. Assets with shorter track records or higher volatility, anything beyond Bitcoin and Ethereum, were structurally excluded from collateral eligibility. The compression of functions into a single contract produced the opposite of capital efficiency: limited asset diversity and constrained market access.

Silo Finance addressed the risk concentration problem of the unified pool by introducing isolated lending pools for each asset. By containing price manipulation or sharp value declines within a single collateral pool and preventing that risk from spreading to others, Silo demonstrated that governance approval thresholds could be lowered and new lending markets opened more rapidly. The architecture showed that a single large pool could be broken apart and risk isolated at the market level, and it pointed toward the layered modular structures that followed.

The modular system that Silo pioneered became a foundational standard for onchain lending as RWA assets, including tokenized Treasuries and private credit, began flowing onchain in volume. Each category of RWA differs fundamentally across trading hours, oracle reliability, regulatory requirements such as KYC and AML, and liquidation procedures. Managing assets this varied under a single unified parameter set, as the early shared-pool model required, is not viable.

The influx of RWA created a demand that went beyond simply isolating assets from one another. It required transplanting the kind of sophisticated risk control frameworks found in traditional finance onto the onchain environment. As assets diversified, the risks emerging onchain grew more complex. Containing those risks required a structural separation between an immutable infrastructure layer handling liquidation and settlement, and an operational layer with real-time authority to adjust and take responsibility for risk parameters.

Early DeFi began by compressing the middle layers of finance into a single codebase. As RWA assets flowed in and the lending market matured, the path taken was different: liquidation and settlement efficiency was delegated to the blockchain, while risk oversight authority was separated into an independent layer. In absorbing greater asset complexity, onchain lending arrived at an architecture that resembles the structures traditional finance had already built, prime brokerage and independent credit assessment, where investment and risk surveillance are kept apart. That modular architecture has become the new standard for onchain lending markets.

4. Institutional-Grade Risk Isolation and Convergence

Although modular architecture emerged from within the DeFi ecosystem itself, it converged precisely with the risk control standards that institutional participants required.

Morpho’s decision to prioritize complete risk isolation at the base infrastructure layer, at some cost to capital efficiency, generated institutional demand. That demand became the inflection point that drew other major lending protocols, those that had started with shared-pool structures, toward the same direction.

4.1. Morpho Blue: Prime Brokerage

Morpho began as an intermediary layer that optimized interest rates on top of first-generation DeFi lending protocols such as Aave and Compound. In that form, it could not exist independently. In 2023, Morpho published the Morpho Blue whitepaper, and in early 2024 it launched Morpho Blue and Morpho Vaults, effectively declaring independence.

The transition moved away from a structure in which governance made all risk decisions across all markets, and separated market creation and risk judgment from the protocol itself. That separation became the structural foundation allowing institutional participants to select and control risk according to their own compliance standards.

Structure

• Morpho Blue: An immutable protocol. Five parameters are fixed at market creation: collateral asset, borrow asset, liquidation loan-to-value ratio (LLTV), price feed, and interest rate model. Anyone can create a market without permission. The protocol itself is responsible only for executing the code as written.

• Morpho Vaults: A risk management layer in which independent curators select eligible markets, set supply limits, and allocate capital. Each vault carries a distinct risk profile.

• Lenders: Depositors with varying risk appetites, including DAOs, protocols, individuals, and hedge funds, select the vault that matches their profile and supply capital.

Traditional prime brokers are expected to perform four functions: liquidation, custody, leverage provision, and risk monitoring. Morpho has automated liquidation and leverage provision at the protocol level through smart contracts. Its non-custodial structure, however, means it cannot provide the custody environment that institutions require for regulatory compliance. Integration with external custodians such as Coinbase or Anchorage is therefore necessary.

Risk monitoring similarly depends not on the protocol but on each curator’s ability to select assets and manage exposure. This creates a persistent risk: curator quality is uneven. The xUSD and Stream Finance incident in 2025 illustrated the vulnerability directly. Several Morpho vaults held xUSD exposure and incurred bad debt. In the aftermath, the market began scrutinizing curators’ asset selection capabilities and real-time risk management more rigorously, and institutional capital concentrated around top-tier curators with demonstrated track records, including Steakhouse, Gauntlet, and Sentora.

Traditional prime brokerage bundled liquidation, custody, leverage, and collateral management into a single institutional counterpart. Morpho replaced that model with a division of labor, distributing each function across specialized actors within the ecosystem rather than concentrating it in one institution.

Institutional adoption is now happening at scale, and it began with centralized exchanges.

• Coinbase: USDC lending service built on top of Morpho Blue, with Steakhouse Financial as curator.

• Binance: Adopted the same structure, with Steakhouse Financial and Gauntlet as curators.

A user pressing the “Borrow” button inside the Coinbase or Binance app receives a loan. The world’s two largest exchanges by volume have chosen the same infrastructure. Adoption has extended to traditional financial institutions as well.

• SG-FORGE: Deploys MiCA-compliant stablecoin EURCV and USDCV on Morpho.

• Apollo: Brings private credit fund ACRED onchain and uses it as collateral on Morpho.

• Bitwise: Curates risk directly on top of Morpho Vaults.

If tokenization opened access to assets, Morpho opened the path to putting those assets to work as productive capital. The trajectory Morpho has set is beginning to present a direction of evolution that lending protocols with very different starting points find difficult to ignore.

4.2. Aave V4: Universal Bank

Aave began as ETHLend, a peer-to-peer loan matching model, before evolving through shared-pool architecture across V1, V2, and V3. In March 2026, it activated V4, a modular architecture, on Ethereum mainnet. Where Morpho chose to structurally separate infrastructure from operations, Aave V4 chose a hybrid model that maintains liquidity efficiency while controlling risk.

Aave recognized that risk isolation and capital efficiency exist in tension. Moving toward isolation contains bad debt contagion but weakens liquidity network effects and reduces capital efficiency. V4 was designed to resolve that tradeoff structurally.

Structure

• Hub: The central layer that consolidates liquidity and accounting. It assigns credit lines and debit lines to each spoke, capping how much liquidity any given market can draw. The basic risk firewall is formed by these per-spoke limits and local parameters.

• Spoke: An individual borrowing market with independent parameters for each asset. When a problem arises in a specific spoke or asset, governance and risk managers can limit exposure by adjusting that spoke’s credit line limit, restricting new borrowing, or activating emergency controls. Because maximum exposure is fixed at the credit line ceiling, the structural spread of contagion is bounded by design.

In traditional finance, this structure resembles a universal bank’s internal credit limit allocation system. The head office assigns credit limits to each division, and when one division runs into trouble, the head office adjusts those limits to contain the spread. The hub plays the role of the head office, and each spoke operates independently like a business division. Unlike Morpho’s full isolation model, where capital is strictly locked within each asset pair, the hub-and-spoke structure allows unused liquidity in one spoke to be redistributed flexibly to more productive spokes through the hub’s credit lines. The result is higher capital efficiency.

This structure becomes a significant advantage in the RWA market. Nascent RWA markets can struggle to attract initial liquidity, but in Aave V4, the existing liquidity hub can serve as a seeding mechanism for new spoke markets. By structuring tokenized assets as independent spokes and setting credit line limits at the hub, new asset classes can be brought to market at lower bootstrapping cost using the liquidity base of safer assets, while initial exposure remains capped within the credit line.

Institutional adoption is organized around Horizon. Horizon launched as a separate RWA lending instance built on Aave v3.3, but its design philosophy aligns with V4’s direction of unified liquidity and risk separation. As it becomes more deeply integrated with V4’s credit line structure, Horizon is likely to consolidate further into Aave’s institutional RWA layer.

Horizon is designed to allow regulated tokenized Treasuries, money market funds, and institutional funds to serve as collateral for stablecoin borrowing, with scope to expand into asset classes such as tokenized stocks and ETFs.

Because approved institutional assets within Horizon are connected to the same institutional liquidity layer, any newly added RWA can immediately draw on existing stablecoin liquidity.

The division of roles within that liquidity layer is as follows:

• Issuers: Investor onboarding and KYC/AML allowlist management.

• Risk manager (LlamaRisk): RWA due diligence and risk framework and parameter proposals.

• Oracle (Chainlink): Onchain price feed provision.

• Protocol (Aave): Smart contract execution.

In traditional Aave markets, adding a new asset requires DAO governance deliberation and a vote, which slows the process. Horizon separates these responsibilities: issuers handle per-asset compliance, LlamaRisk handles risk due diligence, and Chainlink handles price verification. This structure allows institutional asset onboarding and risk adjustments to move faster than routing every decision through general DAO governance.

Where Morpho minimized governance involvement and externalized market creation and risk management, choosing speed and optionality, Aave chose a different path: controlled governance delegation and shared liquidity, preserving capital efficiency.

Both approaches are coherent solutions for transplanting traditional finance’s philosophy of risk distribution onto the onchain environment, but which side the RWA market ultimately converges toward remains to be seen.

4.3.Euler V2: Multi Strategy Hedgefund

In March 2023, Euler suffered a $197 million exploit. The attack exploited a flaw in the smart contract code, and because multiple asset markets were connected within a single protocol accounting and liquidation structure, the damage spread across multiple assets.

After roughly three weeks of negotiation, most of the stolen assets were recovered. Euler nonetheless chose to rebuild the architecture rather than simply repair it, and subsequently repositioned itself as flexible institutional lending infrastructure.

Euler’s entry into the RWA and institutional credit market was driven by a gap in traditional finance’s asset tokenization efforts. Banks were issuing tokenized bonds, funds, and Treasuries, but those assets lacked the onchain infrastructure needed to be used for lending or credit provision.

Rather than drawing institutional demand into volatile long-tail crypto asset markets, Euler began positioning itself as a credit layer for institutional finance, one that gives those assets liquidity onchain.

Structure

• EVK (Euler Vault Kit): A kit for creating ERC-4626-based credit vaults with borrowing functionality. Each vault holds independent parameters for a specific asset and risk configuration, and connects to other vaults through the EVC to form lending markets.

• EVC (Ethereum Vault Connector): The core immutable primitive that connects collateral and debt relationships distributed across multiple vaults, managing them within a single account. In traditional finance terms, it is analogous to consolidating multiple dispersed asset accounts into a single margin account that provides cross-collateral.

Where the EVK enables independent design at the asset level, the EVC connects assets that would otherwise be fragmented into a unified account and position management framework.

In traditional finance terms, Euler shares certain characteristics with the pod structure of a multi-strategy hedge fund. Independent pods each operate with their own strategies and risk limits, while sharing technology infrastructure and capital management systems.

The key difference is that Euler is not a single firm’s internal organization but an open infrastructure where multiple independent actors can create and connect vaults.

By analogy, where Morpho resembles a prime brokerage division-of-labor model and Aave resembles a universal bank shared-liquidity model, Euler resembles a multi-strategy hedge fund’s connected modular structure. The same flexibility and capital efficiency that the architecture enables also creates the possibility of indirect risk transmission from one asset to other positions within the connected vault ecosystem. Curator risk management capability therefore remains a central challenge for the Euler V2 ecosystem.

Euler’s institutional adoption is developing in a direction that accommodates asset-specific characteristics and regulatory requirements. The first front is tokenized stocks. Equity assets trade in a 24/5 environment and require price feeds capable of reflecting corporate events such as dividends and stock splits. Under a single shared-risk structure, building an isolated market meeting those conditions was not feasible. The EVK, which enables independent design at the asset level, made it possible.

In partnership with Ondo Finance, Euler launched STEY, a lending market accepting SPYon (S&P 500), QQQon (Nasdaq-100), and TSLAon (Tesla) as collateral.

STEY Market Structure

• Collateral: Ondo tokenized stocks (SPYon, QQQon, TSLAon)

• Borrow asset: PYUSD (PayPal stablecoin)

• Price feed: Chainlink real-time equity price feeds

• Risk management: Curated by Sentora

Just as traditional finance uses Lombard loans to unlock liquidity from stock holdings, the STEY market replicates that mechanism onchain. Investors can maintain price exposure to tokenized stocks while redeploying borrowed stablecoins into onchain yield strategies, maximizing capital efficiency.

The second front is the combination of tokenized Treasuries and CLOs (collateralized loan obligations). Euler launched the KPK USDC Prime RWA Vault to demonstrate this structural flexibility.

KPK USDC Prime RWA Vault Structure

• Collateral: VBILL (VanEck tokenized Treasury), STAC (Securitize AAA-rated CLO)

• Borrow asset: USDC

• Price feed: RedStone daily NAV feeds

• Risk management: Curated by Sentora

CLOs require periodic NAV pricing through oracles and asset-specific liquidation standards. Tokenized Treasuries require strict compliance controls. Without modular infrastructure that allows independent hooks and parameters to be custom-designed at the vault level, onboarding either asset class as onchain lending collateral would have been extremely difficult.

The possibility of indirect risk transmission from overlapping exposure to the same assets, oracles, and collateral nonetheless remains, and Euler V2 faces the ongoing challenge of calibrating the balance between flexibility and control.

All three protocols are addressing the barriers to institutional entry from different starting points and with different methodologies.

• Morpho: Fully externalizes market creation and risk management to maximize speed and optionality, with the quality of the curator layer as the critical variable to validate.

• Aave: Combines controlled governance delegation with V4’s hub-and-spoke architecture, pursuing a hybrid approach that preserves capital efficiency without compromising stability.

• Euler: Uses the EVK and EVC to secure both per-asset independence and cross-collateral flexibility simultaneously, seeking the optimal risk balance within a multi-strategy structure.

Their approaches differ, but all three are converging on the same structural direction: separating the base execution infrastructure from the risk judgment layer, and designing asset-specific risk parameters for each collateral type.

5. Conclusion

In traditional capital markets, prime brokerage took decades to establish itself as the core infrastructure supporting hedge funds across trading, custody, settlement, leverage, and risk management. The collapse of Lehman Brothers in 2008 and the Reserve Primary Fund bank run each exposed distinct categories of systemic risk, and the market became more attentive to custody, collateral, liquidity management, and role separation in the aftermath.

The DeFi ecosystem arrived at a structurally similar set of conclusions in far less time. The reason it could move so quickly is that code moves faster than regulation.

After early shared-risk structures encountered governance bottlenecks and experienced unexpected exposure and bad debt contagion, Morpho, Aave, and Euler each implemented risk isolation and operational separation onchain in a fraction of the time. The DeFi market has learned through repeated cycles of actual capital loss and architectural rebuilding, compressing into years a process that took traditional finance decades.

The history of traditional finance shows that the maturation of infrastructure such as prime brokerage was one of the conditions that enabled the hedge fund industry to grow. After 2008, total hedge fund AUM approached $2 trillion as infrastructure stabilized and institutional capital began flowing in. Between 2015 and 2025 alone, the industry grew from $1.4 trillion to $4.5 trillion. As infrastructure matured, genuine competition in strategy and risk management began at the operational layer above it, and managers who demonstrated superior capability attracted the market’s capital.

The onchain lending market is entering a similar inflection point. With Morpho, Aave V4, and Euler V2 all converging on risk isolation and operational separation, the central question is now the competition that will unfold at the operational layer above that infrastructure.

Total AUM across onchain curation vaults currently stands at approximately $7.4 billion. Given how substantially the hedge fund industry grew after its infrastructure was established, the onchain credit market today resembles the early stages of a much larger expansion.

In traditional finance, Goldman Sachs and Morgan Stanley held near-duopoly control over prime brokerage infrastructure, and hedge funds had to accept their terms to gain access. Onchain infrastructure operates differently. Opening a market on Morpho or Euler requires no institution’s permission.

With the infrastructure monopoly broken, competition at the onchain operational layer is likely to unfold more openly and more rapidly than it did in traditional finance. In the traditional market, platforms such as Bridgewater, Millennium, and Citadel, along with alternative asset managers such as Blackstone and Apollo, attracted large pools of capital through a combination of operational capability and infrastructure access.

Onchain, any actor with the capacity to assess collateral, design risk parameters, navigate institutional regulatory requirements, and build a track record now has the opportunity to capture a position in the emerging credit market, on an infrastructure that is far more accessible than what traditional finance has ever offered.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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News of a U.S. strategic Bitcoin reserve has been circulating for nearly two years. The original BITCOIN Act, introduced in 2024, centered on active government purchases. ARMA contains no such provision. Whether the market should treat this as positive news is an open question.

Key Takeaways

• The executive order Trump signed in March 2025 was a commitment not to sell the bitcoin the federal government already holds. It was not a purchase mandate. The market had expected something more, and when the order was announced, the bitcoin price fell 5.7% immediately.

• The legislative effort that began in 2024 has retreated substantially over two years, from a bill requiring the purchase of one million BTC to a custody bill that contains no purchase obligation at all.

• The American Retirement and Monetary Advancement Act (ARMA), the bill with the strongest current prospects for passage, is not a purchase bill. It prohibits the government from selling the bitcoin it already holds for at least twenty years.

• ARMA is unlikely to have a material short-term effect on the bitcoin market. Over the longer term, however, establishing bitcoin’s legal status as a national reserve asset could reopen the debate over mandatory purchases, which would be a positive for the market.

1. Background: What the U.S. Has and Has Not Done

Throughout the 2024 presidential campaign, Trump repeatedly promised a bitcoin strategic reserve. Markets read this as a signal that the federal government would become a direct buyer.

After the election, on March 6, 2025, Trump signed an executive order designating bitcoin seized through criminal investigations and civil forfeitures as a strategic reserve and directing that it be held permanently. The order contained no instruction to acquire new bitcoin. It was a pledge not to sell what the government already owned. The price fell from roughly $92,000 to below $85,000 when the order’s contents became clear.

At the time of signing, the federal government held approximately 190,000 BTC, equal to about 0.9% of the total supply of 21 million. Every coin in that holding had been accumulated through criminal and civil proceedings. Not a single bitcoin was purchased.

The position today remains unchanged. Beyond the executive order, nothing has been codified into law.

2. Legislative History

Discussions that began in 2021 produced the first concrete bill in 2024, which was reintroduced in 2025 and then restructured as ARMA in 2026. The through-line in that progression is a pattern of accommodation to political reality: mandatory purchase volumes were maintained, then eliminated. Each revision made passage more plausible but reduced the market impact.

2.1. 2024: The Original Bill

Senator Lummis had been publicly calling for bitcoin to be incorporated into federal reserves since she entered the Senate in 2021. At the time there was no consensus within Congress for such a step, and the crypto winter of 2022 and 2023 together with the collapse of FTX made the environment more hostile still.

The mood shifted in 2024, when bitcoin crossed $100,000 and spot ETFs received regulatory approval. In July of that year, Lummis introduced the first specific legislation: a bill requiring the purchase of one million bitcoin over five years, to be held for at least twenty years, funded from Federal Reserve surplus accounts.

One million BTC represents 4.76% of total supply and exceeds Strategy’s reported holdings of approximately 840,000 BTC. The bill died automatically when that congressional session ended.

2.2. 2025: Reintroduction and Stalled Progress

In March 2025, the same month as the executive order, Lummis reintroduced the BITCOIN Act as Senate Bill 954. The core structure was unchanged: purchase 200,000 BTC annually for five years to accumulate one million, with a twenty-year holding requirement. The revised version removed certain exemptions from the disposal ban, tightening the hold obligation, and added four co-sponsors.

Market reaction was broadly positive, but the bill faced substantial headwinds on three fronts.

First, the fiscal cost. One million bitcoin at prevailing prices represents hundreds of trillions of won. Fiscal conservatives within the Republican Party argued that gold is a stable store of value whereas bitcoin is a speculative asset, and opposed any mandatory purchase structure on those grounds.

Second, dollar hegemony. Led by Representative Maxine Waters, Democratic critics argued that treating bitcoin as a reserve asset would effectively undermine the dollar’s status as the global reserve currency.

Third, the Treasury Secretary’s position. In August 2025, Secretary Bessent stated publicly that the administration would not pursue additional bitcoin purchases. The official who would be responsible for executing the law had gone on record against it.

The bill has remained in committee in the Senate Banking Committee since.

2.3. 2026: ARMA as a Legislative Compromise

In May 2026, Representative Nick Begich introduced the American Retirement and Monetary Advancement Act (ARMA). Democratic Representative Jared Golden signed on as a co-sponsor. The change of name was itself strategic: it was designed to shed the associations that had made the earlier legislation difficult to advance and to widen the coalition of supporters.

ARMA does two things. It consolidates all bitcoin currently held or seized by the federal government into a single reserve under Treasury administration, and it prohibits the sale of that bitcoin for at least twenty years. The only permissible exception to the disposal ban is the retirement of national debt.

The decisive difference from its predecessor is what ARMA does not contain. The BITCOIN Act imposed an obligation to purchase 200,000 BTC per year. ARMA removes that obligation entirely. In its place, it instructs the Treasury and the Commerce Department to study and report within 180 days on whether additional purchases could be achieved in a budget-neutral manner. A study mandate is not a purchase mandate.

ARMA is, in substance, a custody and holding bill rather than an acquisition bill. Its purpose is passage, and it is structured accordingly.

3. Near-Term Outlook: Limited Market Impact

Two bills are currently moving in parallel through Congress. The BITCOIN Act (S.954) is before the Senate Banking Committee; ARMA is in the House. Their objectives differ. The BITCOIN Act is an acquisition bill; ARMA is a custody bill.

ARMA has the higher probability of moving first. The BITCOIN Act has been held in committee for over a year, weighed down by its fiscal cost and its Republican-only sponsorship. ARMA carries Democratic support and imposes no purchase obligation, which removes the most common basis for opposition.

That said, ARMA’s passage would not itself constitute a near-term positive for the bitcoin market. If ARMA is enacted, the approximately 320,000 BTC currently held by the federal government would be legally prohibited from entering the market for at least two decades. The overhang from potential government selling would disappear. The problem is that without any purchase obligation, there is also no new demand. What markets have wanted is the government buying bitcoin directly; ARMA does not deliver that. Its practical effect is closer to elevating the March 2025 executive order to statutory status.

What matters is what could follow ARMA. Nick Begich has held bitcoin since 2013, and was one of the House co-sponsors of the BITCOIN Act in March 2025. He is on record supporting bitcoin as a strategic asset. The structure of ARMA suggests a sequenced approach rather than a single-step attempt: establish the legal framework first, then build the acquisition mandate on top of it.

If ARMA passes and bitcoin acquires a formal legal status as a national reserve asset, the debate over mandatory purchases is likely to resume on firmer ground. The pathway to that outcome is longer than markets had initially priced in when Trump made his campaign promises, but the direction has not changed.

In short, ARMA’s passage would have limited near-term price impact. Over the longer term, it remains a constructive factor for the market, and if ARMA passes, the probability of eventual purchase legislation becomes more visible.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Binance and several other crypto exchanges have begun offering stock trading services. This report examines what it means that exchanges are expanding into conventional finance.

Key Takeaways

• The limits of the crypto trading fee model, the rise of perpetual futures DEXs led by Hyperliquid, and a more permissive regulatory environment following the Trump administration have together pushed major global crypto exchanges to reconsider their direction.

• The path those exchanges are now pursuing points toward conventional financial products such as stocks and derivatives, and toward operating structures that resemble tradFi.

• The complication is that centralized exchanges have been the primary liquidity providers sustaining the crypto ecosystem. If they step back from that role, the crypto market may not function the way it once did.

• A period of self-reliance is beginning for crypto projects. Projects that can survive without exchange support and those that cannot are about to diverge.

1. Buying Apple Stock on Binance

Since June 1, users have been able to buy stocks such as Apple (AAPL) and Alphabet (GOOGL) directly through the Binance app. The following day, Binance announced support for trading in SK Hynix, Samsung Electronics, and Hyundai Motor, three of the most actively traded stocks on the KOSPI.

Binance’s interest in stock markets dates to 2021. That April, the exchange launched tokenized stock trading covering Tesla (TSLA), Apple (AAPL), and Microsoft (MSFT), only to shut the service down entirely by July of the same year under mounting regulatory pressure. Three structural problems had made the product untenable: the legal classification of stock tokens as securities versus derivatives was unresolved; the investor prospectuses required under EU regulations were absent; and Binance itself held no direct license to operate such a service. Germany’s BaFin, the UK’s FCA, and Hong Kong’s SFC all raised objections on those grounds.

The current launch is structured differently. Binance has routed order execution through a broker-dealer licensed by the Abu Dhabi Global Market (ADGM), giving the service a clear legal classification as brokerage. The ambiguity over who issues the underlying instrument, which was a central point of contention in 2021, is largely removed.

The timing is notable. Bybit launched a TradFi perpetual futures market around the same period, adding coverage of KOSPI names including SK Hynix and Samsung Electronics as well as perpetual futures on SpaceX (SPCX). Coinbase separately announced support for SPCX futures trading.

The question is why the major crypto exchanges have begun moving in the same direction at roughly the same time, away from a crypto-only model and toward something that more closely resembles a conventional financial services app.

2. Three Pressures

Three forces have pushed exchanges away from the crypto-only model.

2.1. Falling Crypto Trading Volume

The first pressure is the decline in crypto trading volume. Exchange revenue is ultimately tied to altcoin trading volume, and that volume is determined by market sentiment.

On Binance, daily average spot trading volume fell roughly 80%, from a peak of approximately $45B in October 2025 to $7.7B today. Across other centralized exchanges combined, volume dropped around 70%, from a peak of roughly $63B to $18.8B. As trading volume declined, the fee-based revenue model began to break down. That a business model dependent on crypto trading fees cannot produce a sustainable revenue structure is something the exchanges themselves had long recognized.

2.2. Hyperliquid Absorbing On-Chain Volume

Comparing altcoin trading volume outside of Bitcoin and Ethereum against RWA asset volume including stocks and commodities on Hyperliquid makes the current situation clear.

Hyperliquid has begun drawing on-chain liquidity by supporting futures trading in stocks and commodities. As of mid-2026, 23 of the top 30 assets by perpetual futures volume on Hyperliquid were stocks and commodities, not crypto.

The premise that on-chain activity belongs exclusively to crypto no longer holds. The emergence of a decentralized exchange whose volume rivals that of centralized exchanges has put those exchanges on notice.

2.3. Regulatory Shift

The third pressure came from the change in the regulatory landscape following the start of the Trump administration. The SEC dropped its lawsuits against Coinbase and Kraken. When regulators were adversarial, applying for conventional financial licenses carried real risk. Those licenses can now serve as a mark of credibility and a point of differentiation.

With clearer boundaries around what is and is not permissible, exchanges can build on their existing strengths and pursue a new direction. All three pressures converged at roughly the same time, as interest in stocks and other derivatives has also grown. Crypto exchanges now have little choice but to move quickly, along its own path, if they intend to survive.

3. How Centralized Exchanges Are Responding

Centralized exchanges have faced the same set of pressures at the same time, but their responses have diverged.

3.1. Binance: The Everything Store

Binance’s strategy is straightforward. The goal is to become an everything store, keeping all trading activity within its own platform and preventing users from leaving.

Binance had already moved on-chain and done so successfully. Having built its exchange business first, the company launched Binance Chain in April 2019 to capture the on-chain ecosystem, then followed with Binance Alpha in the first half of 2025, taking a meaningful share of on-chain activity.

By 2026, however, on-chain liquidity had begun shifting toward stock markets. When Hyperliquid moved quickly to absorb that liquidity through stocks and commodities, the on-chain user base Binance had cultivated came under pressure. Binance’s response was not to compete with Hyperliquid on-chain directly. Instead, it focused on launching a stock trading service aimed at its existing user base of over 200 million. Retaining users it already has is a more defensible position than fighting Hyperliquid on Hyperliquid’s own ground.

The structure works as follows. Orders placed through the Binance front end are received by Nest Trading, an ADGM-licensed broker-dealer, which then routes them to Alpaca Securities. Execution, clearing, settlement, and custody are all handled by Alpaca. Binance does not hold the securities directly, a structural choice that keeps it outside the scope of direct securities regulation.

Worth noting is that Nest Trading has been identified as a Binance affiliate. Binance also holds a minority stake in Alpaca, and the revenue-sharing arrangement gives Nest Trading 50% of order flow fees and 65% of stock lending income.

Binance is building the infrastructure itself, reorienting toward a financial super-app, and working to hold its existing users before altcoin volume migrates further toward Hyperliquid and stocks.

3.2. Bybit: A Two-Track Approach

Bybit launched in 2018 as a derivatives exchange and grew rapidly on the back of up to 100x leverage and low fees. It is now running two tracks simultaneously: porting centralized exchange liquidity onto the blockchain, and listing conventional asset derivatives directly on the centralized exchange.

The on-chain track came first. In June 2025, Bybit listed Backed‘s xStocks on its spot market, marking its first step into tokenized stock partnerships. That November, a three-way collaboration with Mantle and Backed produced a formal launch of xStocks on the Mantle blockchain, covering major US stocks including Nvidia (NVDA) and Apple (AAPL).

In May 2026, Bybit activated Atomic RFQ on Fluxion, a DEX within the Mantle ecosystem, upgrading the structure to direct issuer execution. Atomic RFQ works by requesting quotes directly from the issuer rather than routing through an AMM, achieving on-chain the execution quality that institutional participants expect in conventional finance.

Bybit has also moved on the centralized side. Facing pressures similar to those on Binance, it launched TradFi perpetual futures in April 2026 and has added new listings weekly. Major US stocks including Tesla (TSLA), Nvidia (NVDA), and Apple (AAPL), along with gold, silver, and crude oil, are now available for 24-hour trading settled in USDT. On June 4, Samsung Electronics, SK Hynix, and Hyundai Motor perpetual futures went live, and SpaceX pre-IPO trading is also supported.

Both tracks are ultimately aimed at building infrastructure for more precise trading of conventional assets across on-chain and off-chain venues. Where Bybit differs from Binance is in its effort to maintain an active on-chain presence through Fluxion and Mantle rather than concentrating entirely on the centralized platform.

3.3. Coinbase: The Most Trusted US Exchange

Coinbase listed on Nasdaq in 2021 and was added to the S&P 500 in May 2025. Backed by Wall Street, it is currently the centralized exchange that carries the most institutional credibility.

Coinbase has also maintained an on-chain presence. The Ethereum L2 Base, launched in 2023, climbed quickly to hold close to half of total L2 TVL by 2025. By 2026, however, growth had stalled and Base no longer appeared to be a core priority for the company.

Where Coinbase has committed most seriously is institutional clients. In August 2025, it completed the $2.9 billion acquisition of Deribit, capturing roughly 85% of the global crypto options market. It then launched a CFTC-licensed futures commission merchant (FCM) service and introduced cross-margin trading that consolidates spot, futures, and perpetual futures positions into a single collateral pool, broadening its institutional client base. Institutional lending balances from hedge funds and asset managers reached a quarterly record that year.

In December 2025, Coinbase opened commission-free stock and ETF trading within its existing app. Where Binance layered a separate brokerage infrastructure and took an indirect approach, Coinbase offers direct trading on the strength of its accumulated regulatory standing. On June 4, it announced support for SpaceX pre-IPO trading.

As Hyperliquid has built liquidity outside the regulatory perimeter by launching a broad range of products, Coinbase’s early entry into stock trading leaves it better placed to respond.

3.4. Kraken: A Federal Crypto Bank

Founded in 2011, Kraken is one of the longest-standing exchanges in the crypto industry. Its strategy is to consolidate licenses, build infrastructure directly, and become a federally regulated institutional crypto custody bank.

Regulatory infrastructure has been the first priority. In March 2025, Kraken acquired NinjaTrader for $1.5 billion, gaining a CFTC FCM license and a retail trader base of two million users. In April 2026, it acquired Bitnomial for $550 million, the only crypto-native platform to have obtained all three CFTC licenses, DCM, DCO, and FCM, over a period of ten years. In March 2026, Kraken secured a Federal Reserve master account, and in May it filed an application with the OCC for a national trust company charter.

On-chain has not been neglected. Kraken launched its own L2, Ink, in December 2024, followed by lending protocol Tydro and perpetual DEX Nado on top of it. DeFi Earn launched in January 2026 and Bitcoin Vault in May. These products are built around assets that can be clearly explained to institutional clients. Altcoins have not been a priority in Kraken’s on-chain strategy either.

While other exchanges have moved into stock trading to retain users, Kraken has chosen a different path, aiming to become the only crypto-native bank that institutional clients can trust.

The strategies of the centralized exchanges covered here differ in their specifics. What they share is that altcoins do not feature prominently in any of their forward plans.

4. What Happens to Crypto?

Centralized exchanges have been the liquidity backbone of the crypto ecosystem. They listed tokens and generated trading volume, and that support is what kept most crypto projects alive.

The underlying problem is that almost no crypto project has demonstrated real value through actual revenue. Token prices have been sustained not by protocol fundamentals but by exchange listings and early liquidity support mechanisms such as launchpools. For that structure to hold, exchanges and traders need to maintain sustained interest in crypto. Retail volume is shrinking, and without it, exchange listings and marketing support will follow. That structure cannot hold indefinitely.

The market itself has shifted toward tokens from projects that can demonstrate value through real product revenue, rather than depending on exchange support. Hyperliquid’s HYPE is the clearest illustration. It is one of the best-performing crypto assets at present, despite being the very actor that has drawn on-chain liquidity away from crypto and toward stock markets. This points to a weakening of the mutually beneficial relationship that previously existed between centralized exchanges and crypto projects.

The position of the exchanges reinforces this reading. Retail trading volume and user count are the foundations of any exchange business. Concentrating on crypto trading volume alone now risks eroding that foundation, because the market no longer finds newly listed crypto assets as compelling as it once did. Exchanges have little choice but to protect the infrastructure and user base they have built while finding other revenue sources to pursue.

That is what has driven the pivot toward stock derivatives, yield products, and custody. In redirecting their efforts, the exchanges have effectively left altcoins to fend for themselves.

In previous downturns, centralized exchanges weathered the bear market alongside crypto. Now they are looking for ways to grow without it. That is why this downturn is likely to be harder for crypto than previous ones.

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• Korea Institutional Crypto: 2026 Landscape

Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

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Crypto is in a downturn, yet the tokenized stock market keeps growing. It splits into fully collateralized spot and perpetual futures, with perps drawing the most attention and a range of strategies emerging.

Key Takeaways

• While equities set record highs, crypto saw both market cap and volume fall. As the two diverged, the tokenized stock market grew by building perpetual futures open interest.

• The market splits into fully collateralized spot and perpetual futures. Perps draw attention because they trade stocks unavailable on home exchanges, 24 hours a day, with leverage on top.

• When the regular session is closed, the price perps set becomes a leading indicator of the next day’s spot open, predicting not just direction but also the size of the move.

• Two retail openings, a delta neutral trade that collects the spot to perp premium as funding, and cross-exchange arbitrage on price gaps.

• The same structure extends to businesses such as market makers, regional oracles, tokenized issuance, and basis hedge funds. Small in scale, but as institutions enter, opportunity exists on both the investment and business sides.

1.Equity Markets Now Pulling In Crypto Liquidity

In Q1 2026, total crypto market cap fell 20.4% and centralized exchange spot volume dropped 39.1%. Bitcoin has been declining since its October 2025 record high.

Equities went the other way. The S&P 500 cleared its annual target, and the KOSPI rode a semiconductor rally to double this year. As total crypto market cap fell sharply, most national equity markets set record highs. The two paths have never split this clearly.

2. Collateral Splits the Market, Capital Flows to Perps

The tokenized stock market splits in two by collateral structure.

Fully collateralized spot deposits real shares 1 to 1, then issues a token. The investor holds the share itself or a legal claim on it. Issuance details differ by platform, but an underlying asset always exists.

Perpetual futures work differently. No real shares are held. The trader posts margin and opens a contract that tracks the price, so there is no claimable underlying. Margin is mostly stablecoins, and a growing number of platforms now accept other assets such as ETH.

Perps draw attention because they keep spot’s advantage, 24-hour access to stocks unavailable on home exchanges, and add far greater leverage. Some fully collateralized spot products on Kraken xStocks offer up to 3x margin, while perps reach up to 20x depending on the product. With no underlying to custody and price tracked only through an oracle feed, listings are fast and the range of tradable tickers is wide.

Against traditional markets it is still small. US equity markets turn over about 1.1 trillion dollars a day. Stock perp open interest, the total of contracts currently live, sits at 2.25 billion dollars. The metrics differ, so a direct comparison is hard, but the market is clearly early stage.

The direction is clear. OI rises each quarter, and regulators are starting to treat it as a market. The SEC has cited perps as an innovative financial product, and the CFTC is publicly reviewing US institutionalization. It began outside regulation, but is moving inside the system faster.

3. The 24-Hour Market vs the Real Market

Tiger Research tracks this shift, offering a tool that compares Korean stock prices on overseas perpetual markets against KRX spot in real time. It aggregates prices from the perp exchanges that support Samsung Electronics, SK Hynix, and Hyundai Motor using a volume-weighted average, set side by side with each name’s domestic spot price.

The data so far shows three patterns.

3.1. Overnight Perp Moves Predict the Next Open

Korea’s market stops at night. US markets move, Nvidia reports, FX swings, but Korea sees no trading until the next morning. Perps trade through it.

This raises a question. With spot closed, what price do perps reference?

The answer is that they do not follow one. While the session is open, perps pull spot prices from institutional data. When it closes, perp participants’ own trades set the price directly. Rather than copying a closed spot market, they discover a new price that reflects overnight news and macro variables.

The data bears this out. On days perps rose after the close, the next session opened higher 82% of the time for Samsung Electronics and 95% for SK Hynix. When perps fell, the next session opened lower 96% for Samsung Electronics and 78% for SK Hynix. Directional match runs around 85% for both, with correlation of 0.85 to 0.89.

Magnitude tracks too. A 3% overnight gain in perps led to an open roughly 3% higher. The regression coefficient of perp change against the actual opening gap is 0.93 for Samsung Electronics and 1.00 for SK Hynix, all but signaling how far the move will run.

Weekends are sharper. From Friday close to Monday open, the perp-implied direction matched the actual Monday open 93% of the time for Samsung Electronics and 87% for SK Hynix, because perps absorb two days of global variables first.

Reading the overnight perp price gives an early read on where the morning open will land.

3.2. Delta Neutral Trade on the Spot-Perp Premium

Perps have no expiry. To keep the price from drifting too far from its reference, longs and shorts exchange a fee at set intervals, called the funding rate.

For example, when a perp trades above its reference, the gaining longs pay the losing shorts. The larger the premium, the larger the payment. When one side gains more than the reference, it is charged accordingly. As traders move to avoid that cost, the price converges back to the reference.

In the data, Korean stock perps traded above spot, with an intraday average premium of 0.15% for Samsung Electronics and 0.23% for SK Hynix. Selling the perp means collecting that premium as funding each cycle.

The strategy follows. Buy KRX spot intraday and sell an equal amount of the perp at the same time. If the stock rises, spot gains and the perp loses. If it falls, the reverse. The two offset, so the outcome is near zero whichever way the stock moves. In return, funding comes in from the short perp. The position earns from the premium alone, with no bet on direction. Removing directional risk this way is the delta neutral trade.

The premium does not last. The perp to spot gap closed halfway in about 40 minutes on average. It suits high-volatility phases where premiums widen, and it requires constant monitoring.

3.3. Arbitrage on Cross-Exchange Price Gaps

At the same moment, for the same name, perp prices differ across exchanges. In June 2026 data, Binance’s Samsung Electronics perp traded 0.93% higher on average than Hyperliquid’s. SK Hynix showed a 1.03% gap, widening to as much as 2.3%.

Perp positions cannot move between exchanges. Instead, a trader opens opposite positions on both at once. Short on the higher-priced exchange, long on the lower, and the directional P&L offsets. As the two prices converge, the original gap remains as profit. On the higher side, the short also collects funding, adding return.

Later-entrant exchanges tend to hold higher prices because less arbitrage capital flows in. These gaps recur in the early phase as more exchanges launch. They widen further at night and on weekends, when spot is closed and each exchange discovers price on its own.

4. Market Shifts and Emerging Opportunities

One catch in this market is fragmentation, which is both a risk and an opportunity. As the same name scatters across Korea’s existing exchanges and Hyperliquid, Binance, and Lighter, liquidity splits. With price spread across venues, it is harder to agree on which is real, and differing prices create room for confusion and manipulation. Stack leverage on thin liquidity and liquidations can cascade. An opportunity, and a risk.

The openings above were for retail. The same structure also opens business opportunities.

• Market makers: the same name trades 0.15% to 0.75% apart across exchanges, and the gap widens at night. In an early market with little arbitrage capital, spreads stay wide. With thin liquidity and several exchanges managing fragmented liquidity, market making demand should keep growing.

• Regional oracles: perps discover price while spot is closed, and accuracy hinges on the oracle. A specialized oracle that feeds accurate prices for Asian-timezone assets such as Korea, Japan, and Taiwan is still an open space.

• Tokenized issuance: listed Korean names today are limited to Samsung Electronics, SK Hynix, and Hyundai Motor. The market needs an intermediary to list and manage KOSPI 200 names and major Asian companies.

• Basis hedge funds: perps convert the premium over spot into funding cash every hour. A dedicated fund collecting basis and funding gaps across exchanges turns capital faster than a conventional basis trade, though the market is still too small to absorb it.

The perp market is small against traditional markets, but it matters. It discovers price first, stays open 24 hours, and is institutionalizing fast. Opportunity remains on both the investment and business sides.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Partnerships and equity acquisitions among Korean institutions are accelerating simultaneously in the crypto market. Yet the landscape remains difficult to read at a glance. Announced partnerships are abundant, but actual commercial deployments remain rare. This report examines why the conversion rate is low, and why institutions continue to move forward regardless.

Key Takeaways

• Korean institutional crypto activity has moved beyond MOUs into concrete business operations and exchange equity acquisitions.

• Competition is intensifying beneath the surface as institutions race to claim critical financial infrastructure, including STO standard-setting, stablecoin payment rails, and custody markets.

• Domestic infrastructure builders are emerging as a core pillar of institutional business, constructing Korea-native rails aligned with Bank of Korea CBDC frameworks and local regulatory requirements, reducing dependence on foreign technology.

• The playbook for overseas Web3 foundations entering Korea has shifted entirely, moving from retail community building to partnerships with large corporates and financial institutions, as traditional finance accelerates its takeover of the market.

1. The MOU Arms Race

The relationship map above, compiled by Tiger Research, maps the connections across Korea’s institutional crypto landscape. Yet the structure is not easy to read at a glance. It is difficult to distinguish which lines represent active business operations and which are simply MOUs, and the boundary between central hubs and peripheral players remains blurred.

What is notable is that this complexity itself accurately reflects the current state of Korea’s institutional crypto market. As Tiger Research’s dataset of 150 institutions and 196 partnerships confirms, no single hub has yet achieved dominant control over the market.

Domestic institutions are simultaneously building their positions across the market before regulations are fully finalized. Competition is currently organized around three fronts: stablecoins, STOs (security token offerings), and custody (crypto asset storage).

Also notable is a sustained wave of financial institutions acquiring equity stakes in exchanges, a move interpreted as a confidence-driven push to secure footholds ahead of full regulatory clarity.

2. The Exchange Equity Scramble

Within less than ten days of Hana Bank announcing its acquisition of a 6.55% stake in Dunamu, the operator of Upbit, for approximately KRW 1 trillion (approx. USD 720 million), Hanwha Investment Securities approved the acquisition of an additional 3.90%. On May 28 of the same month, Samsung Securities, Samsung SDS, and Samsung Card jointly announced a combined 4.0% acquisition. Mirae Asset Consulting had already signed a contract in February to acquire 92.06% of Korbit, and reports emerged that Korea Investment Securities and global exchange OKX are in discussions over a joint acquisition of Coinone.

The competition reflects a revaluation of crypto exchanges, which are now seen not merely as trading fee platforms but as critical customer touchpoints through which stablecoins, custody services, security tokens, and RWA products can be distributed.

Banks and securities firms gain a pathway to indirectly obtain licenses such as VASP registration while simultaneously securing an exchange’s user base and liquidity. The current equity scramble is ultimately a contest over who will control the front-end of digital asset finance.

3. Korea’s Crypto Market by Sector

A sector-by-sector look at the relationship map reveals an uneven landscape. Custody has the most operational activity, with a number of players already running live services after clearing regulatory hurdles. RWA and STO, by contrast, remain largely stuck at the contract or MOU stage, waiting for enabling legislation to take effect. Stablecoins face a similar stall, with no clear standard-setter yet in a position to claim market leadership.

Because the nature of the barrier differs by sector, so does the strategy for breaking through. Some players are consolidating domestic coalitions while waiting for regulation to open. Others are turning to overseas markets where regulation has moved faster, carving out alternative paths. The sections below examine the specific barriers and player strategies in each sector.

3.1. RWA/STO: Legislation Passed, Commercialization Infrastructure Is the Bottleneck

The domestic STO market is divided into two camps: the KOSCOM-led consortium and the Shinhan Investment Securities-led fractional investment alliance. Mirae Asset Securities has taken a separate path, leveraging overseas operations rather than waiting on domestic infrastructure.

KOSCOM, a core financial network operator in which Korea Exchange holds a 76.6% stake, is pursuing a neutral infrastructure model consistent with its founding mandate to provide shared infrastructure for securities firms. Rather than signing exclusive agreements with individual issuers, it is integrating 11 securities firms onto its platform, aiming to set issuance and distribution technology standards and secure interfaces compatible with Korea Securities Depository aggregate custody management requirements.

Shinhan Investment Securities has moved quickly to build its own STO ecosystem. Starting with a proof-of-concept with Lambda 256 in 2022, it launched the joint platform PULSE in 2024 and formalized a multi-platform account integration service in 2025. In 2025 alone, it participated as account manager in 10 investment contract security issuances, and secured a controlling stake in OTC exchange NXT, establishing an end-to-end pipeline from issuance to distribution within its own ecosystem.

Mirae Asset Securities bypassed domestic infrastructure development entirely and moved overseas. It issued a digital bond in Hong Kong, obtained a digital asset retail license from the Hong Kong Securities and Futures Commission (SFC), and plans to launch an MTS in June targeting retail investors in the market. In the United States, it is the only Korean securities firm to join the DTCC-led tokenization working group, which includes JP Morgan, Goldman Sachs, and BlackRock, participating in global standard-setting discussions. The strategy positions Mirae Asset to hold advantages in regulatory alignment and negotiating leverage when domestic STO infrastructure eventually connects to global standards.

3.2. Stablecoins: Legislation, Not Technology, Is the Bottleneck

The stablecoin market features a more diverse set of participants than other sectors. Card companies, exchanges, fintechs, and infrastructure firms are each entering through different routes, drawing on their respective strengths.

The largest camp is the Kakao Group. Kakao, KakaoBank, and Kakao Pay have formed a joint task force to build a “super wallet” spanning stablecoins, crypto, and local currencies. Their key asset is the infrastructure accumulated through operating the Kaia public chain since the Ground X era. Kaia has already deployed Tether (USDT) on its network and is conducting live payment tests.

Shinhan Card is focused on migrating its existing payment network onto blockchain rails. Shinhan Card signed an MOU with Solana in April, though the technical groundwork preceded the agreement. The company had already completed an initial proof-of-concept in collaboration with Solana, Visa, Mastercard, and Fireblocks, and is now running advanced tests across six areas including wallets and smart contracts.

The exchange camp is routing around KRW stablecoin delays via dollar stablecoins. Dunamu is developing a KRW stablecoin business with Naver Financial, built on its proprietary blockchain GIWA. Bithumb, facing delays in KRW stablecoin regulation, has chosen to secure a dollar stablecoin distribution network first through partnerships with Circle and WLF. A joint KRW stablecoin initiative with Toss is also under discussion, though progress remains slow.

All camps are active, but all face the same regulatory wall. The Bank of Korea is pushing a 51% rule requiring that only bank-majority consortiums be permitted to issue stablecoins, while fintech firms are pushing back for access, delaying government-ruling party consultations. Once issuance guidelines are released, the camp that has secured the most comprehensive public-facing touchpoints is expected to take market leadership.

3.3. Custody: More Institutional Capital Needed

The custody market is structurally simpler than other sectors. Four major custodians have each secured domestic and international financial and technology partners to establish their market positions.

KODA was co-founded by KB Kookmin Bank, Hashed, and Haechi Labs, combining traditional financial capital with crypto-native VC. Hanwha Investment Securities, IBK Capital, and Kyobo Securities have since joined as investors, and a dedicated custody insurance agreement with Samsung Fire & Marine further reinforces its stability.

KDAC is a traditional finance-led custodian with Shinhan Bank and NH NongHyup Bank as major shareholders. NH NongHyup Bank was originally an investor in a separate custodian, Kardo, and became a KDAC shareholder following a merger. Post-merger, KDAC counts two of Korea’s five major banks among its shareholders.

BDACS has taken a distinct approach centered on technology and partnership development. Expanding custody and payment infrastructure through a partnership with Woori Bank and international digital asset infrastructure firms including Galaxy and GK8, it has also signed an MOU with Circle to issue the KRW stablecoin KRW1 on Circle’s Arc blockchain, and is the sole VASP and a key custody partner in the KRX-led KDX consortium. Currently conducting a PoC for KRW1, BDACS is positioning itself as a custodian targeting both custody and payment infrastructure simultaneously.

BitGo Korea entered the domestic market on the strength of its global parent’s technology. BitGo’s headquarters custodies over USD 70 billion in assets and processes approximately 20% of all Bitcoin on-chain transactions globally. Domestically, Hana Financial Group and SK Telecom each hold stakes, making it a custodian backed by both financial and telecommunications capital.

Various institutions have entered the market through their respective custodian relationships. However, all major custodians are reported to have posted net losses last year, suggesting they have built ahead of the institutional capital flows needed to sustain operations.

Taken together, the infrastructure buildout across STO, stablecoins, and custody reveals a clear common limitation: domestic institutions have constructed their business frameworks, but the underlying technology infrastructure remains largely dependent on overseas solutions.

4. The Infrastructure Builders

Dependence on overseas solutions carries a structural cost: as the market grows, a significant share of revenues will flow abroad in the form of technology licensing fees. Domestic infrastructure also becomes exposed to the risk of disruption should overseas partners change their policies or raise costs.

The more fundamental problem is that areas requiring alignment with Korea-specific regulatory environments, such as KRW stablecoin issuance, STO distribution rules, and domestic corporate account integration, cannot simply apply global solutions off the shelf. This is precisely why domestic technology firms capable of directly designing and controlling the underlying rails in accordance with Korean regulatory frameworks will be essential once relevant legislation is finalized and capital begins to move in earnest.

Domestic companies that have identified this technical gap and are building Korea-specific financial infrastructure are already in motion. The leading technology providers are as follows.

4.1. LG CNS

Among traditional IT service firms, LG CNS has taken the most visible position. Since launching its proprietary blockchain platform ‘Monachain’ in 2018, it has built operational expertise by supplying services to over 220 local governments through the Korea Minting and Security Printing Corporation’s local currency platform.

This permissioned blockchain experience translated into CBDC and STO contract wins. As the lead contractor for the Bank of Korea’s CBDC project ‘Hangang’, LG CNS is developing a government subsidy disbursement system utilizing deposit tokens. Through this process, it has built the capability to architect systems that run institutional CBDC and private digital currency on a single network, effectively transplanting the security standards and procedures of traditional finance onto a blockchain.

Development of KOSCOM’s joint STO issuance platform and Mirae Asset Securities’ STO platform follows the same logic. Rather than issuing assets directly, LG CNS is targeting three axes: building issuance and distribution platforms for banks, providing SaaS to payment operators including card companies, PGs, and simple payment services, and developing digital asset payment platforms for securities firms. It appears to be the most credible candidate to capture the infrastructure contract market once regulatory frameworks are finalized.

4.2. DSRV

Among blockchain infrastructure firms, DSRV stands out for directly enabling financial institutions’ entry into onchain infrastructure. A validator and infrastructure company with operations across more than 70 blockchain networks, DSRV manages over KRW 4 trillion (approx. USD 2.9 billion) in assets, ranks first in Ethereum staking domestically, and sits in the global top 10.

The key development is its expansion beyond node operation into full-stack institutional onchain infrastructure. Through DSRV Portal, financial institutions can access wallet, payment, tokenization, custody, and staking functions via API and dashboard interfaces. Without building their own node and security infrastructure, financial firms can attach user wallets, institutional wallets, recurring payments, token issuance, burning, transfer and lockup, custody, and staking capabilities.

Trust mechanisms are also in place. DSRV leads with VASP, ISMS, and SOC 1 Type 1 certifications, directly addressing the regulatory, security, and operational control requirements that financial institutions demand. In practice, this means an external infrastructure provider takes on the wallet security, internal controls, and operational risk that financial firms find most burdensome when deploying onchain services.

Its partnerships are oriented toward payment rail construction. With SBI Ripple Asia, DSRV is jointly developing Korea-Japan regulation-compatible remittance infrastructure. With Circle, it is developing an institutional USDC issuance, redemption, and settlement framework that bypasses exchanges. With BC Card, it has signed a stablecoin payment infrastructure agreement connecting traditional card payment networks to blockchain.

DSRV recently closed a KRW 30 billion (approx. USD 21.7 million) Series B round, accelerating its technology development.

4.3. Altus(Prev. B-Harvest)

Altus (formerly B-Harvest) operates at the integration layer between financial institutions’ legacy systems and blockchain environments. Founded in 2018, the firm has contributed to Cosmos SDK-based EVM chain development and is an organization of 40+ engineers and researchers who have directly built multiple production networks including Canto, Stable, and Ault.

Altus handled protocol engineering and core architecture for Ault Blockchain, an institutional L1 focused on RWA, trading, and payments. In 2025, it contributed to EVM integration, performance improvements, and security audits for Babylon, the Bitcoin staking L1, supporting its production readiness.

Its financial institution solutions originate from the same layer. Altus builds from scratch to financial industry requirements: on/off-chain orchestration layers bridging legacy systems to blockchain execution environments, RWA tokenization, permissioned exchanges, stablecoin payment and settlement, and institutional wallet and custody infrastructure.

Current internal R&D runs in parallel: Canton Network architecture supporting selective data disclosure between institutions, and Commonware Stack, a modular blockchain framework targeting 1M TPS.

The three firms start from different positions with different strengths. LG CNS leads with financial IT credibility, DSRV with blockchain validator infrastructure, and Altus with protocol-level custom design capability. Yet all share the same destination: securing the core operating systems before institutional capital flows in at scale. The determining factor is how much credible build experience each can accumulate before the market fully opens.

5. Retail Out, Institutions In

The recent surge in partnership announcements should not be read as ordinary business development. These are positioning moves: institutions are staking out favorable arrangements before regulation is finalized, then using those arrangements to shape what the regulatory framework ultimately looks like. The current partnership race is less about market capture and more about regulatory design.

Korea’s crypto market has restructured significantly in just six months. Custody camps have formed, STO consortiums have taken shape, and major financial holding companies have moved to acquire exchange equity. Meanwhile, retail trading volume has declined sharply. Combined trading volume across Korea’s five major exchanges fell approximately 48% year-on-year. The market’s center of gravity is shifting rapidly from retail to institutional.

This shift has also changed how overseas crypto foundations approach Korea. Just as Solana was adopted as Shinhan Card’s partner and Avalanche as Mirae Asset’s, foundations entering the domestic market have shifted their primary focus from exchange trading volume to partnerships with financial institutions and large corporates. The community meetup model that once drove retail liquidity is no longer effective.

The results of this market restructuring are expected to become visible at KBW 2026, taking place in Seoul this September, an event that consistently reflects prevailing market conditions. A look at the confirmed speaker lineup already shows traditional finance figures in the majority. Where last year’s overseas foundations competed through token-incentivized community side events, this year’s focus is expected to shift toward substantive business discussions.

Tiger Research is the research partner of KBW 2026.

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Disclaimer

This report has been prepared based on materials believed to be reliable. However, we do not expressly or impliedly warrant the accuracy, completeness, and suitability of the information. We disclaim any liability for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information available at the time of preparation and are subject to change without notice. All projects, estimates, forecasts, objectives, opinions, and views expressed in this report are subject to change without notice and may differ from or be contrary to the opinions of others or other organizations.

This document is for informational purposes only and should not be considered legal, business, investment, or tax advice. Any references to securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or an offer to provide investment advisory services. This material is not directed at investors or potential investors.

Terms of Usage

Tiger Research allows the fair use of its reports. ‘Fair use’ is a principle that broadly permits the use of specific content for public interest purposes, as long as it doesn’t harm the commercial value of the material. If the use aligns with the purpose of fair use, the reports can be utilized without prior permission. However, when citing Tiger Research’s reports, it is mandatory to 1) clearly state ‘Tiger Research’ as the source, 2) include the Tiger Research logo. If the material is to be restructured and published, separate negotiations are required. Unauthorized use of the reports may result in legal action.

Circle has released its Q1 2026 earnings report. Reserve interest income from USDC still accounts for over 90% of revenue. To move beyond this concentration, Circle is developing initiatives including the Ark Network. What does the next phase look like?

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Summary

With Q1 2026 results as the inflection point, Circle is accelerating its paradigm shift from a simple stablecoin issuer to an integrated infrastructure operator for the digital asset industry. Its forward business strategy rests on three core pillars.

1. Maximize USDC margin and circulation: Reserve interest income accrues on both external and proprietary platforms. Higher USDC use on Circle’s own channel (CPN) drove RLDC margin to a record 41.4% this quarter. To expand issuance, Circle has partnered with the DEX Hyperliquid.

2. Launch the proprietary L1 ‘Arc’ to diversify gas and fee revenue: 94% of Circle’s revenue currently comes from USDC reserve interest. Once Arc expands Circle’s platform and generates platform fee revenue, the over-reliance on reserve interest can be structurally resolved.

3. Capture AI payments via Agent Stack: Circle is staking out the standard for autonomous micro-payments between AI agents. Full commercialization is targeted for 2028, aligned with infrastructure rollout and GENIUS Act effectiveness.

In sum, Circle is putting aggressive USDC issuance expansion through anchor platforms like Hyperliquid at the front, while vertically integrating its financial stack across its own L1 (Arc), payments network (CPN), and AI nano-payments (Agent Stack). The key point is that USDC circulation growth and diversified infrastructure now pull each other forward.

Through this, Circle is expanding from a simple interest-revenue business into a platform business driven by traffic and transaction fees.

Q1 2026 Recap. Margins on the Mend

1. Top-line growth and margin gains. On-platform mix strengthens earnings quality

Q1 2026 revenue reached $694M (YoY +20%), with adjusted EBITDA of $151M (YoY +24%) and an adjusted EBITDA margin of 53%, an improvement in profitability. Currently, 94% of Circle’s total revenue depends on reserve interest income.

The 31bp QoQ drop in reserve yield (from 3.81% to 3.50%) was therefore a critical revenue headwind. Yet RLDC margin rose for the third consecutive quarter to a record 41.4%. Even with rate-dependent revenue, which accounts for the bulk of the top line, taking a direct hit, Circle succeeded in improving its underlying earnings quality.

The key driver of margin improvement is rising USDC usage on Circle’s own platforms. On-platform share jumped from 6% to 17.2% in Q1 (YoY +1,149bps), while off-platform share narrowed to 55%.

This reflects successful institutional onboarding to Circle Payments Network (CPN), Circle’s proprietary payments network. Member financial institutions grew to 136 in a single quarter (+36% QoQ), and annualized total payment volume (TPV) expanded to roughly $8.3B (QoQ +17%).

The staged rollout of CPN’s payment product lineup underpins this trend.

1. Fiat Payments (Q2 2025 launch): cross-border payments handling payouts and pay-ins in local currencies across 50+ countries

2. Stablecoin Payments (Q3 2025 launch): direct payment and settlement in regulated stablecoins (USDC, EURC) across 180+ countries

3. Managed Payments (Q2 2026, April launch): Circle delivers licensing, custody, compliance, and USDC liquidity through a single integrated API. Partners only handle fiat and do not need to take on digital asset custody, operations, or regulatory response

This matters for long-term earnings quality because revenue attribution differs entirely by deposit location. Balances on external platforms like Coinbase require sharing reserve interest, while balances on Circle’s own platforms such as Circle Mint and CPN accrue fully to Circle.

In other words, a higher on-platform mix reduces partner distribution costs and lifts RLDC margin. For any given top line, Circle’s effective earnings power strengthens.

That said, CPN’s own usage-fee revenue has not yet ramped. As CFO Jeremy Fox-Geen noted on the prior earnings call, the current phase prioritizes network growth over monetization. CPN today functions less as a direct fee channel and more as a conduit pulling funds into Circle’s own platform. As a stepping-stone defending against external distribution costs, the Q1 results show that this strategy is working.

2. Net income decline hidden behind the growth

However, unlike the top-line growth and margin gains, the bottom line shows a clear divergence that warrants attention. Q1 net income came in at approximately $55M, down 15% YoY.

Drivers are post-IPO stock-based compensation flowing through and a sharp rise in pre-launch Arc infrastructure and R&D spend. Adjusted figures, stripped of one-time and non-cash items, remain strong. Net income trajectory still warrants attention.

Circle Moves Into Full Vertical Integration

1. USDC. Strengthen the core, expand issuance

Reserve income in Q1 2026 was $653M, accounting for 94% of total revenue. With Circle’s core business so concentrated in reserve income, top-line growth requires USDC issuance expansion.

USDC circulation currently sits around $77B. The core question for Circle’s structural growth is how far this circulation ceiling can be pushed. USDT’s earlier surge was anchored in Binance trading-pair preemption.

Circle plans to extend this preemption playbook to the DEX Hyperliquid. Coinbase’s recent acquisition of Hyperliquid’s native stablecoin USDH is a representative case. Rather than deploying USDH as the platform’s native pair, Hyperliquid sold it and registered USDC as the official pair.

Hyperliquid’s deposit growth flows directly into USDC issuance. Hyperliquid TVL doubled from $2B in Q1 2025 to $4B in Q1 2026, and peaked at $6B. Because Hyperliquid uses USDC as its base deposit asset, platform growth translates directly into new USDC issuance. The forward circulation scenario built on this is as follows.

Under this scenario, growth from Hyperliquid alone could lift total USDC circulation from $77B today to $84B in three years. A single platform would account for more than 10% of total circulation, becoming a massive issuance channel.

Conceding 90% of reserve interest income to the platform does leave Circle with reduced near-term profitability. But as the cost of securing irreplaceable volume of roughly KRW 15T (~$11B) in daily turnover and a 17% share of the DEX derivatives market, this is close to an acceptable trade-off.

If Hyperliquid-based derivatives products follow, the virtuous-cycle structure strengthens further. For a Circle that prioritizes circulation expansion over near-term margin, Hyperliquid is a strategic stronghold worth preempting even by splitting margin.

2. Arc. How Circle Exits Rate Dependency

As noted above, Circle’s revenue is heavily concentrated in reserve interest income, leaving the business structurally exposed to a rate-cutting environment. Arc is still in the testnet phase and generates no visible revenue yet. With its recent ~$222M institutional funding round, Arc has emerged as the core infrastructure designed to sever this rate dependency at the root.

Arc’s primary target is the global cross-border payments market. According to the World Bank report (RPW Issue 54), the global average remittance cost is 6.36% and the bank remittance cost reaches 14.99%. The drivers of this high-cost structure include SWIFT’s multi-tier intermediation, opaque FX spreads, and weekend settlement delays.

In addressing the inefficiencies of legacy financial rails, Circle aims to generate platform business revenue on top of Arc. The infrastructure fee revenue that lowers rate dependency is built on two core pillars.

1. Circle Payments Network (CPN): onboards global institutions and corporates to Arc for cross-border payments and settlement, capturing processing fees on traffic. Q1 institutional inflow seeds full Arc mainnet transaction revenue.

2. On-chain FX engine (StableFX): supports on-chain stablecoin conversion, replacing the high intermediation spreads of traditional FX. On execution, smart contracts collect predefined fees from each trading currency.

StableFX runs on an RFQ model, not SWIFT’s fixed-cost structure. Market makers competitively bid in real time and quote the tightest wholesale spread. Large transfers settle 24/7 with no SWIFT fixed fees and no slippage.

More CPN traffic and StableFX volume on Arc means more direct infrastructure and fee revenue. The non-rate revenue structure completes.

This shift is already being validated through the testnet and participating enterprises. Per Arcscan, the public testnet has logged roughly 430M cumulative transactions and 3.26M transactions in the last 24 hours since opening. Over 100 global institutions are participating, including BlackRock, HSBC, Visa, and AWS.

Beyond traditional finance, Polymarket, a blockchain-based prediction market, has also joined the ecosystem.

This goes beyond piloting features and platforms. Arc is pulling in real enterprises and driving real transaction traffic. If Arc operates as intended, Circle can expand from a USDC reserve-interest revenue structure to infrastructure operating revenue. Arc is the first step in unwinding a revenue structure tied to interest rates.

According to the roadmap, Arc mainnet launch is set for this summer. Meaningful Arc revenue is expected to come after mainnet launch.

3. Agent Stack: Blueprint for autonomous AI payments

An ‘agentic economy’, in which AI agents make decisions and transact on behalf of users rather than humans, is approaching. Global big tech firms including Google and OpenAI have already begun actively rolling out such autonomous systems.

The bottleneck is payment infrastructure. The fees generated when AI agents call APIs are priced at micro levels (sub-cent units) that legacy payment systems cannot process. Routing such micro-payments through credit card networks produces a fee structure where the cost outweighs the principal, so every transaction generates a net loss. Agent payments cannot structurally fit existing card rails.

Circle targeted this gap and launched the ‘Circle Agent Stack’, which uses USDC as the settlement asset and provides the tooling to build the surrounding environment.

1. Agent Wallets: AI autonomously holds and sends USDC within human-set rules (e.g., spend limits)

2. Agent Marketplace: storefront where AIs source API services and settle per call

3. Agent Nanopayments: instant USDC settlement down to ~$0.000001 with no gas

4. Circle CLI: command-line tool for wallet creation and agent connections

5. Circle Skills: modules letting AI agents operate Circle’s financial product suite directly

Revenue here is not yet at the visible stage either. The path to market adoption and revenue recognition is expected to progress through the phased roadmap below.

1. 2026 (Infrastructure phase): technical foundation for stable, large-scale nano-payment processing. Arc mainnet activation this summer anchors partner integration of Circle CLI and financial modules.

2. 2027 (Regulatory anchoring phase): GENIUS Act takes effect, completing the institutional safety net for enterprise entry. With stablecoin securities exemption and 100% safe-asset backing legally binding, even conservative corporate legal teams can adopt and test USDC payment systems internally without risk.

3. 2028 (Commercialization and monetization): technical foundation and regulatory legitimacy fully align. The agentic economy reaches full commercialization. Enterprises grant AI agents real spending authority, large-scale transactions emerge, and Agent Stack results land in reported revenue.

As a result, until full traffic-driven revenue arrives in 2028, Agent Stack is likely to operate as an ‘expectation premium’ priced into the share price as future market preemption value, ahead of actual revenue.

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Authority in DeFi lending is shifting from protocols to curators who hold judgment rights. Market entry comes down to one choice: borrow this judgment, supply it, or own it.

Key Takeaways

1. An asset manager role is emerging in DeFi. The era when protocols and governance decided everything is over.

2. The market is still early, but capital and distribution already concentrate around top curators. Their track records are becoming the institutional benchmark.

3. There are three entry paths: Distribution (curator as backend), Supply (post assets onchain), and Operator (become a curator).

4. The path chosen determines the control gained, the capabilities required, and the risks taken on.

5. The core question is not whether to enter DeFi, but which judgment rights to delegate and which to keep.

1. Risk Curators: Onchain Asset Management Specialists

Just as traditional finance has long separated judgment from execution, the crypto market has matured to the point where specialized players own each function. Traditional finance divides the work as follows.

• Asset Manager: The fund’s “brain.” Sets strategy and gives specific instructions to the custodian.

• Custodian: Holds assets, executes investments per the manager’s instructions, and oversees them.

• Distributor: Distributes fund products to investors and gathers capital.

Crypto has its own version of each role. DeFi was originally built to rely entirely on smart contract code, but over time it became clear that code alone cannot fully control onchain risk.

To run onchain lending safely, a new class of specialists emerged to assess and coordinate these complex risks. They are called Risk Curators, and they have effectively taken on the asset manager role in the onchain ecosystem.

2. Early DeFi Had No Specialists

Early DeFi protocols like Aave and Compound bundled lending infrastructure and risk standards into a single structure. Risk curators existed at the time, but with every asset sitting in one giant pool, their role stayed at the level of a system-wide “risk manager” tuning the protocol’s overall risk parameters. As volatile assets flowed in, the single-pool design meant one bad asset could spread losses across the entire system, and someone had to manage that contagion risk.

That changed with Morpho, which split collateral assets and lending terms into separate markets. Replacing the single giant pool with a multi-vault structure modularized the asset management strategy, and the role of risk curators flipped entirely. Instead of defensively managing within a single protocol’s fixed framework, external specialists could now design and operate their own independent lending vaults under their own standards.

With infrastructure and risk judgment fully separated, risk curators evolved from system-wide risk managers into the crypto market’s “asset managers,” actively running multiple vaults.

3. Who Leads the Market

As of May 2026, the risk curator market manages roughly $7B in assets. The top three teams hold 70% of that $7B. The market only took off in 2025, yet capital is already concentrating, a sign that capital is following teams with proven track records. Each of the three reached the top through a different path.

1. Steakhouse: A conservative curator that has led the adoption of high-grade real-world assets (RWA) such as US Treasuries. It serves as the backend for Coinbase’s lending service, opening a distribution channel, and ranks #1 with $1.53B AUM (as of February 2026). Beyond AUM, this team sets the standard for which real-world assets qualify as legitimate DeFi collateral.

2. Sentora: A team built on AI risk models and institutional data infrastructure. Wired into Kraken as a backend, it has secured a pipeline for institutional capital. #2 at $1.34B AUM. Won the distribution channel linking exchanges to institutional clients.

3. Gauntlet: Originally an onchain quantitative analysis firm that simulated risk parameters. In October 2025, when $775M flooded one of its pools, the team normalized the collapsed APY within 10 days, proving its capability. #3 at $1.29B AUM. Recognized as the team with risk defense and crisis response for large capital inflows.

At this stage, the risk curator market is no longer a simple TVL race. It is a fight to claim the standards first: collateral criteria, distribution channels, and risk response capability.

4. Traditional Asset Management vs DeFi Risk Curators

As Morpho fragmented the market, each collateral type needed a specialist to make the call. Professional risk teams like Steakhouse stepped in as DeFi risk curators. Through this shift, DeFi is starting to resemble the traditional asset management process.

Reading the diagram from top to bottom shows how today’s DeFi infrastructure replicates the division of labor in traditional finance onchain.

• Capital sourcing and distribution (top): Institutional investors sit at the top as the capital source. Their large pools flow into the onchain ecosystem through major CeFi exchanges and platforms, which take the role of TradFi distributors (brokerages).

• Strategy design and risk control (middle): Below sit the DeFi risk curators, who decide how the incoming capital is managed. Like the portfolio managers (PMs) and risk committees of traditional asset managers, they set asset eligibility and limits and design the overall investment strategy.

• Product assembly and custody (bottom): The curator’s strategy becomes an investable onchain product through the vault infrastructure beneath it. At the very bottom, the lending protocol primitive holds the assets and executes settlement in code, taking the place of TradFi’s custody and trading infrastructure.

From capital sourcing through management and custody, the entire process now mirrors the division of labor seen in traditional finance. For incumbent TradFi institutions, onchain lending is no longer unfamiliar territory but a structured market they recognize, and the opening for entry follows naturally.

5. A TradFi-Like Industry: Where Is the Opportunity?

As onchain lending infrastructure adopts a division of labor similar to TradFi asset management, the door has opened for institutional entry. But not every layer carries the same barrier.

• Distribution layer: Customer-facing market, already saturated by major crypto firms. It is inefficient for TradFi firms to fight head-on at the point of contact.

• Management layer: A field driven entirely by financial expertise and manpower. Evaluating, controlling, and packaging asset risk matches the core work of traditional asset managers. Without building complex systems, they can apply their existing risk management capability onto already-built modular infrastructure and immediately secure a business model.

• Custody and infrastructure layer: Asset custody and trade processing, a technology-intensive business that demands deep blockchain engineering capability. It is unrealistic for TradFi firms to build their own systems and compete here.

Unlike the other layers, which require technology or platform incumbency, the management layer is the clearest window of opportunity, where TradFi firms can take market leadership using only the risk management capability they already hold.

Institutions currently enter the DeFi market through three paths: Distribution, Supply, and Operator. Whichever path is chosen, the engine driving the market is the asset manager’s “risk curation” capability.

5.1. Distribution: Curator as Backend

Connect a proven external curator as the backend and enter the market quickly. This fits exchanges and fintechs with customer channels but no in-house management capability. Strategy is outsourced, but reputational risk and accountability for the curator chosen stay in-house.

This is the route chosen by centralized exchanges with strong customer touchpoints but no appetite for managing the complex risks of onchain lending directly. They have connected verified external risk curators as the backend and launched lending services. The exchange distributes large pools of capital through its own platform, while collateral evaluation and risk management are handed off entirely to the partner risk curator

5.2. Supply: Push Assets onto Onchain Rails

Asset managers holding RWAs or credit assets supply those assets directly to the market. Like Apollo, they can supply assets while acquiring Morpho governance tokens, shaping the standards (such as collateral criteria) of the infrastructure that will carry their assets. The hard parts are asset standardization and regulatory infrastructure build-out.

Large private equity funds or institutions holding real-world assets (RWAs) place their own capital directly onto onchain rails. Apollo went beyond simple asset supply and acquired governance tokens of major lending protocols. The move aims to drive the rules and standards so that its real-world assets are recognized as more favorable and safer “official collateral” in the onchain market.

But asset suppliers cannot register just any asset as collateral. Someone has to coldly assess whether the asset is genuinely safe and whether it can be liquidated immediately when an onchain liquidation event hits. That requires the rigorous evaluation capability of a risk curator who vets and vouches for asset eligibility. In the end, the supply path also stands only when an asset manager’s risk validation capability backs it.

5.3. Operator: Become the Curator (Bitwise)

An asset manager designs its own strategy and runs its own vaults. Bitwise defined the onchain vault as “ETF 2.0” and jumped in directly. This path holds the strongest controls over fees and collateral standards, but the manager also bears full responsibility for any operating failure. It fits asset managers with an in-house risk team.

This is the path where a traditional asset manager steps out as a risk curator itself, without relying on external platforms. Bitwise defined the onchain lending vault structure as “ETF 2.0” and entered the market directly. Drawing on its own portfolio construction capability and risk control system, it designs and controls the vaults itself, securing the management fee model directly onchain.

6. Before Big Capital Arrives

Looking at the trajectory so far, traditional asset managers are likely the best positioned as onchain lending matures. As the DeFi ecosystem modularizes and divides labor, the capability the market actually needs has shifted. Not the ability to write code, but the traditional finance expertise of underwriting collateral and setting risk limits. The competitive edge of institutions that have done this work for decades carries over onchain.

But today’s DeFi market is too small for global mega-managers to step in directly. The global traditional asset management market is roughly $147T. BlackRock alone runs $14T in AUM. By contrast, the entire DeFi market is about $80B, and the slice handled by risk curators is just $7B. That is 1/2,000th of BlackRock’s AUM.

But the sheer scale gap is what shows the runway for growth. Institutional capital does not enter places where risk is not controlled. Once risk curators lay rails for capital to run safely onchain and the regulatory outline takes shape, the story changes. Even a sliver of the $147T flowing in expands the $80B market quickly.

Some opportunities exist only while the market is small. The main players in the risk curator market today can be counted on one hand. Rails are required for institutions to come onchain, and the teams that lay them first set the standards.

Institutions that arrive later will get a safer, clearer market. They will also be one of many participating inside standards that have already been set.

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The Senate Banking Committee passed the CLARITY Act on May 14. Indirect stablecoin interest has been banned, but activity-based rewards are now permitted. Several other significant provisions were also amended. What business opportunities do these changes create?

Key Takeaways

• Stablecoin yield dispute resolved via bipartisan compromise: passive holding interest banned, activity-linked rewards permitted. Largest legislative obstacle cleared.

• Senate Banking Committee vote complete. Hard deadline: August recess. Executive pressure: Trump targeting July 4 signing. Final passage expected by July.

• Key provisions on enactment: indirect passive interest banned; activity-based rewards (payments, trading) permitted; unregistered token sales allowed within caps; securities reclassification safe harbor established; sufficiently decentralized DeFi protocols exempt from SEC oversight.

• Business model implications: activity-based lock-in reward models activated to reduce capital outflow; token IB ecosystem (advisory, investor matching, issuance SaaS) emerges as a new market vertical.

• 2026: institutional order replaces the ungoverned era as jurisdictions globally benchmark U.S. rules. Dual dynamic: institutional capital drives mass adoption; compliance costs slow early-stage innovation.

1. What Stalled the CLARITY Act?

The CLARITY Act’s core purpose is to codify the jurisdictional boundary between the SEC and CFTC. What delayed it by four months was a single provision: the stablecoin interest ban.

The central dispute: should platforms continue paying 4-5% annual yield to stablecoin holders? Banks demanded a full ban, citing deposit outflows. The crypto industry pushed back, calling it a threat to core business models. Coinbase’s opposition to the full ban stalled negotiations into May.

On May 1, Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks introduced a bipartisan compromise: ban interest on passive holding, but permit rewards tied to bona fide activity such as payments, trading, and staking. Coinbase, which had blocked the January markup, announced support the same day.

With the White House, SEC, and Treasury aligning behind the compromise, the Senate Banking Committee passed the amended bill 15-9 on May 14.

2. How Long Until Final Passage? (~2 Months)

The May 14 committee vote completed the markup phase. Four steps remain before the bill becomes law:

1. Consolidation of three bills into one unified text

2. Senate floor vote

3. House floor concurrence vote

4. Presidential signature and enactment

Two factors make July passage the most likely outcome.

First, the August recess is the practical deadline. Approximately 11 weeks remain before Congress breaks. Missing that window means the bill collides with midterm campaign season and the budget cycle, making passage within the 119th Congress uncertain.

Second, the Trump administration is actively pushing. The president has publicly stated a July 4 signing goal, roughly 7 weeks out. The administration has already applied pressure to Congress before, and will again if the schedule slips. Critically, the stablecoin interest provision, which triggered two failed markups over four months, is now resolved.

The hardest part of the negotiation is done.

3. Key Provisions of the CLARITY Act Amendment

Regardless of when the bill achieves final passage, the May 14 markup already signals a significant shift for the U.S. cryptocurrency market. The sections below examine which provisions matter most.

3.1. Prohibition on Indirect Stablecoin Interest (Sec. 404)

Stablecoin yield was the sharpest point of conflict between the banking sector and the crypto industry. Banks called for a complete ban; crypto firms argued that paying yield on stablecoins was fundamental to their business.

Sec. 404 resolves the dispute by prohibiting exchanges from passing interest to users indirectly. The prior arrangement worked as follows: a user holding USDC through Coinbase would earn yield, with funds flowing through issuer Circle into U.S. Treasuries, and the resulting interest returned to the user. From the user’s perspective, this was functionally identical to a bank deposit.

From the bank’s perspective, it represented a direct deposit substitution risk. That is what drove the banking sector’s strong opposition.

The bill bans yield on passive holding and permits only rewards tied to bona fide activity. However, the definition of “activity” remains unspecified in the bill text. Whether payments, governance votes, or app logins qualify is delegated entirely to subordinate rulemaking by Treasury and the CFTC.

3.2. Legal Token Issuance Pathway (Sec. 103 + 105)

Together, these two provisions establish a legal framework for token sales to U.S. investors.

• Sec. 103 (Reg Crypto Exemption): Creates a registration exemption allowing token sales to U.S. users without SEC registration, up to $50M annually or 10% of circulating supply, whichever is greater, with a $200M cumulative cap.

• Sec. 105 (Token Design Safe Harbor): Specifies that governance rights or staking rewards alone cannot classify a token as a security. Tokens already ruled non-securities by courts cannot be reclassified by the SEC.

The two provisions serve distinct but complementary roles. Sec. 103 opens the path to selling tokens; Sec. 105 ensures that path remains open by blocking post-sale reclassification. Neither works without the other. Sec. 103 alone leaves issuers exposed to retroactive SEC action. Sec. 105 alone offers classification protection with no route to market.

For the first time, issuers have a genuine alternative to the default practice of blocking U.S. users. The U.S. market is now a viable option to incorporate into issuance design.

3.3. DeFi Regulatory Exemption (Sec. 301)

For the first time, DeFi protocols have a legal path to exemption from U.S. regulatory oversight. The SEC can no longer require a qualifying DeFi protocol to register as a securities platform.

The exemption is conditional. A protocol must be sufficiently decentralized, meaning no single party can unilaterally modify its operation. Concentration of admin keys, upgrade authority, or security council powers in one entity disqualifies a protocol.

Emergency interventions in response to security incidents, however, are not treated as centralized control. Protocols can maintain decentralization while retaining the ability to respond to exploits and breaches.

Decentralization is no longer a design philosophy. It is now a prerequisite for U.S. market access.

4. Post-CLARITY Strategy

4.1. Activity-Based Reward Businesses

The bill text (Sec. (c)(3)(A)) lists payments, governance voting, staking, and USDC transactions as explicit examples of qualifying activity. Based on this, activity can be broadly defined as specific, utility-driven user actions that contribute to blockchain network or platform activation, as distinct from passive holding.

The mechanics mirror a credit card cashback model. Rather than paying interest on deposits, platforms reward users only when a qualifying action is taken, with rewards accruing proportionally to balance. Three categories of beneficiaries emerge:

• Exchanges and crypto apps can move beyond competing on fee reductions. By linking rewards to actual trading or in-app engagement, platforms give users an incentive to keep assets on-platform and remain active, converting idle deposits into locked-in, active capital.

• High-traffic platforms and traditional card companies can fund customer reward programs through Treasury yield generated by stablecoin reserves rather than their own marketing budgets. This externalizes reward costs, reduces direct marketing spend, and allows platforms to retain a portion of yield as margin.

• DeFi protocols with established staking infrastructure stand to benefit most. Platforms unable to build their own reward systems will rely on institutionally recognized staking providers, likely producing a winner-takes-most dynamic among the most stable and credible protocols.

In summary: strong capital lock-in through activity rewards, marketing cost reduction via yield externalization, and new B2B revenue streams.

4.2. Legal Token Issuance Businesses

Sec. 103 sets a $50M annual fundraising cap ($200M cumulative), and Sec. 105 protects lawfully issued tokens from post-sale reclassification as securities. Together, these provisions are best understood as the legalization of public token sales (ICO/IDO) targeting U.S. investors, and a catalyst for rapid growth in compliant issuance infrastructure demand.

The ecosystem will broadly mirror traditional IPO infrastructure, with three analogous business categories emerging:

• Issuance infrastructure platforms will offer modular, SaaS-based systems covering KYC, accredited investor verification, automated disclosure, token lockup management, and treasury administration. Each project using the platform generates recurring B2B revenue without rebuilding infrastructure from scratch. Coinbase’s Echo is an early example of this model.

• Issuance advisory firms and major VCs will provide end-to-end services spanning token structure design, regulatory compliance, and post-issuance dispute response. This mirrors the investment banking role that Goldman Sachs and Morgan Stanley play in traditional IPOs. Firms such as a16z and Paradigm are expected to internalize advisory functions directly.

• Accredited investor matching businesses will connect global project teams with U.S. investor databases, a task that is currently near-impossible to execute independently. Traditional asset managers and digital asset IR firms will operate as dedicated brokerages, facilitating capital connections efficiently within statutory caps.