According to a joint report released by Coinbase and advisory firm EY-Parthenon, institutional interest in cryptocurrencies continues to rise despite recent market downturns. Notably, 83% of surveyed institutions plan to boost their crypto allocations by 2025.
The study, conducted in January among 352 institutional decision-makers, revealed growing confidence in digital assets as regulatory clarity improves and use cases expand. 59% of respondents aim to allocate over 5% of their managed assets to cryptocurrencies within the same timeframe.
Institutions broadly view crypto as offering "attractive risk-adjusted returns" over the next three years, reinforcing their bullish outlook.
Altcoin ETFs Could Accelerate Institutional Adoption
The report highlights that institutional investment in altcoins may surge if U.S. regulators approve altcoin ETFs. The SEC is currently reviewing over a dozen altcoin ETF proposals, with analysts speculating that approvals could unlock new institutional capital inflows.
Bloomberg Intelligence identifies Litecoin, Solana, and XRP as front-runners for potential ETF approvals, noting their rising popularity in institutional portfolios.
Stablecoins and DeFi Gain Institutional Traction
Stablecoins and decentralized finance (DeFi) are also drawing institutional attention:
- 84% of surveyed institutions already hold or are evaluating stablecoin applications.
Primary use cases include:
- Yield generation (73%): Participation in DeFi lending, staking, and yield farming.
- Forex trading (69%): Leveraging stablecoins for cross-border payments and cost-efficient settlements.
- Treasury management (68%): Integrating stablecoins for short-term liquidity solutions.
- Merchant payments (63%): Facilitating faster cross-border transactions.
While only 24% of institutions currently use DeFi platforms, adoption is projected to reach 75% within two years.
Crypto Firms Pursue Banking Licenses Amid Regulatory Shifts
Per Reuters, multiple crypto and fintech companies are applying for U.S. banking charters, anticipating lighter oversight under a potential Trump administration.
Advantages of banking licenses include:
- Enhanced credibility: Attracts institutional and corporate clients.
- Lower funding costs: Enables deposit-taking, reducing reliance on external financing.
- Expanded services: Permits offering loans, payment solutions, and other financial products.
However, securing licenses remains challenging. Post-2008, the U.S. averages just 5 approvals annually, down from 144/year in 2000–2007.
Notable successes:
- Kraken: Obtained a Wyoming banking charter in 2020.
- Anchorage Digital: Became a federally chartered bank in 2021.
- Nexo: Acquired a stake in a licensed U.S. bank in 2022.
Regulatory tensions persist, as banking compliance (e.g., AML/BSA rules) may conflict with crypto’s decentralized ethos.
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FAQs
Q: Why are institutions increasing crypto investments?
A: Growing regulatory clarity, diversified use cases, and expectations of high risk-adjusted returns drive adoption.
Q: Which altcoins are likely to get ETF approvals?
A: Litecoin, Solana, and XRP are top contenders based on market demand and regulatory feasibility.
Q: How do institutions use stablecoins?
A: For yield farming, forex, treasury management, and payments—balancing efficiency with low volatility.
Q: What’s the outlook for DeFi adoption?
A: Institutional DeFi usage could triple by 2026 as platforms enhance compliance and user experience.