The Yield Gap in Cryptocurrency: A Barrier to Institutional Adoption
A recent Redstone study revealed a significant disparity between the cryptocurrency market and traditional finance regarding yield generation. Only 8 to 11 of the 3.2 trillion cryptocurrency market produces yield, compared to 55 to 65 in traditional finance. This gap poses a major obstacle for institutional adoption, as institutions require predictable, auditable yield which is currently fragmented and risky in the crypto space.
Max Sandy, Head of Product at Ramp Network, emphasized that this gap is not just a statistical anomaly but a fundamental barrier to institutional investment. He stated,
Institutions cannot deploy serious capital without predictable, auditable yield.
Sandy pointed out that yield drives mandate design, risk models, and allocation frameworks, but in crypto, it is still fragmented and heavily dependent on unstandardized smart contract risk.
The Redstone study highlights why large-scale capital allocators remain cautious. Without standardized yield mechanisms, institutions struggle to integrate crypto into existing frameworks that rely on stable, interest-bearing instruments. Sandy argued that closing this gap will require key upgrades such as building resilient infrastructure, increasing transparency around yield generation, and improving user experience.
The yield gap also represents crypto s greatest opportunity for growth. Sandy identified two immediate sources for new yield-generating assets: liquid staking derivatives LSTs and tokenized real-world assets RWAs . He stated,
The most immediate growth will come from two areas: liquid staking, and tokenized real-world assets RWA like Treasuries and short-duration credit.
Looking ahead, Sandy predicted that stablecoin yield will become a baseline expectation for users.
Phil Wirtjes, CEO of Enclave Global, noted that institutional priorities are shifting towards systematic, yield-driven strategies. He observed a 260 year-to-date growth in tokenized RWAs and emphasized that this change is about executing yield strategies with integrity rather than just chasing yield. Wirtjes stated,
Institutions no longer ask, What can I earn? but, How can our strategy scale without information leakage, MEV extraction, conflicts of interest, or custodial risks?
Regulatory clarity is crucial for scaling tokenized real-world assets. Sandy stressed the importance of legal certainty around ownership and enforceability for institutions to make large allocations. He stated,
The key is legal certainty around ownership and enforceability. Institutions must know that an on-chain token representing Treasuries or credit corresponds to a real, enforceable claim in the off-chain world.
Once regulators clarify custody rules and issuer obligations, RWAs could scale significantly, shifting the challenge from legal certainty to distribution and user access.