Crypto Yield Experiences a Transformation
The landscape of crypto yield is witnessing a significant transformation. What initially erupted as a speculative craze leading to the catastrophic events of 2022 is now shifting towards more sustainable and compliant avenues for crypto investors to generate returns without the peril associated with previous disasters. These returns, derived from the productive use of digital assets, are moving away from the chaotic risks that characterized the earlier phases. The cryptocurrency market, now valued at approximately $3.4 trillion, is beginning to offer yield opportunities that meet institutional standards, contrasting sharply with the vague and high-risk offerings that led to the 2022 downfall. A minor reallocation from the $19.4 trillion in US household deposits could potentially redirect hundreds of billions into yield-generating crypto assets. While native crypto platforms are at the forefront of this evolution, traditional financial institutions are cautiously entering the space through tokenized treasury operations, with BlackRock’s tokenized funds and blockchain-based cash management being notable examples. A limited institutional involvement could potentially increase the market by an additional $300-600 billion.
Lessons from Traditional Banking Failures
Victor Levrero’s experience highlights the pitfalls of traditional banking. In 2022, as inflation in Argentina surged to 94.8%, his bank offered a seemingly attractive 30% interest on peso deposits. However, this rate paled in comparison to the rampant inflation, which effectively eroded the value of his savings. The peso itself depreciated by around 65% within a year, leading to significant financial losses. Traditional banking systems failed to safeguard his wealth and instead contributed to its decline. This dire situation prompted Levrero to explore crypto platforms providing annual returns of 13% on US dollar-backed stablecoins, viewing it as a matter of financial survival. He was not alone in this pursuit; millions in Latin America and other economically fragile regions, facing currency devaluations and banking crises, opted to safeguard their assets in stablecoins. Conversely, in developed nations, low interest rates rendered savings accounts virtually worthless, unable to keep pace with inflation. Traditional savings accounts offered paltry returns of around 0.5%, while crypto platforms promised returns ranging from 15% to 50%, attracting both cautious investors and speculative traders.
The 2022 Crypto Collapse
In developing markets, cryptocurrencies emerged as a vital resource, whereas in more stable economies, they turned into speculative instruments that ultimately contributed to the market collapse of 2022. As the pursuit of high yields intensified, reckless practices emerged. Various platforms expanded rapidly, enticing users with increasingly attractive rates while employing risky rehypothecation strategies. Many engaged in overleveraged trades and circular lending practices that were often obscured from users. The alluring yield figures, which should have raised concerns, instead spurred a frenzy driven by speculation and the quest for profit. When market instability struck, this precarious structure crumbled, leading to a series of failures that resulted in billions of dollars in losses for investors. Notable casualties included Voyager Digital, which saw $1.3 billion of its assets locked up, and BlockFi, which ceased operations affecting 100,000 customers. The collapse of FTX alone resulted in an $8 billion loss, and when combined with the downfall of Terra Luna and subsequent liquidations, over $2 trillion vanished from the crypto ecosystem. Ultimately, retail investors chasing yields bore the brunt of the fallout. However, this devastation did not spell the end for crypto yield; rather, it prompted a necessary evolution.
Establishing Robust Foundations for Yield
So, where does crypto yield originate in this new landscape? Today’s platforms function similarly to digital banks, generating revenue through three primary channels: lending (earning the difference between deposits and loans), staking (validating blockchain transactions for rewards), and market-making (earning fees for facilitating trades). The distinction between current platforms and those that faltered in 2022 lies in their commitment to transparency and structured operations. Unlike the obscured practices of the past, many contemporary platforms provide real-time proof of reserves, utilize segregated custody to prevent risky rehypothecation, and include institutional-grade insurance. Their returns are supported by transparent collateral, regular audits, and regulated assets like US Treasuries. Although yields are generally lower, they are more sustainable, relying on verifiable lending spreads rather than unsustainable Ponzi-like schemes.
Investor Behavior Shifts
An equally crucial change has taken place in investor mentality. The previous obsession with simply increasing numbers—the fixation on returns without consideration of underlying fundamentals or risks—has shifted to a more cautious and informed approach akin to institutional standards. Investors now seek clarity in regulation and transparent audit trails, recognizing that yields of 4-6% backed by US Treasuries are more appealing than lofty 20% promises from offshore entities. Today’s due diligence entails assessing publicly verifiable asset support, legal jurisdictions, and whether returns are derived from well-collateralized loans rather than hidden leverage tactics. The reputation of a platform—shaped by its regulatory compliance, user experience, and resilience during past market fluctuations—now plays a pivotal role in its overall value proposition. Trust in this environment is no longer just a marketing strategy; it has become a fundamental checklist for investors.
Leading Players in the Yield Space
Currently, three major players are at the forefront of the yield-generating market, collectively managing assets worth over $26 billion as of mid-2025. Coinbase stands out for its regulatory clarity and US jurisdiction, providing institutional investors with custodial transparency and the protection of direct US oversight. Although this results in lower yields, it offers compliant crypto exposure, reducing the risks associated with offshore counterparts. This strategic positioning enables Coinbase to attract corporate treasuries and risk-averse institutional funds. Binance, operating across more than 180 countries, boasts unparalleled trading volumes; however, its extensive global reach faces mounting regulatory scrutiny, prompting market exits in various regions and raising concerns about its long-term compliance strategy. The sustainability of its yield offerings hinges on navigating these challenges while maintaining its liquidity advantage. Kraken takes a conservative approach, emphasizing security and compliance to appeal to institutions prioritizing reliability over aggressive growth, thus establishing itself as a trustworthy option in a volatile sector.
Emerging Models: From High Yield to Trustworthiness
While leading players dominate market share, new platforms are emerging by focusing on enhanced risk management, real-time transparency, and mission-driven initiatives. The industry’s shift towards overcollateralized lending, insurance backing, and social impact integration signals a broader transition from profit maximization to sustainable business practices. For instance, CoinDepo, launched in 2021, provides returns of up to 24% APY on stablecoins and 18% on cryptocurrencies through overcollateralized loans supported by guarantors and Fireblocks insurance. By combining blockchain efficiency with traditional financial safeguards, it facilitates secure deposit earning, low-risk lending, and charitable contributions, all while supporting NGOs such as Damark in Africa—demonstrating that high returns can coexist with social responsibility. Other platforms are exploring diverse strategies within this framework, such as Maple Finance, which leads in permissioned DeFi lending with thoroughly vetted institutional borrowers and stringent underwriting, appealing to corporate treasuries through transparent credit assessments. Meanwhile, platforms like Aave and Compound emphasize high-quality disclosures and borrower evaluations, showcasing the variety of approaches within the industry as it seeks to establish its risk-reward balance.
The Regulatory Landscape
Under the leadership of former SEC Chair Gary Gensler (2021-2025), yield-generating crypto products were classified as unregistered securities, effectively stifling much of the market. However, with the current SEC Chair Paul Atkins, there appears to be a shift towards clearer, innovation-friendly guidelines. A significant development in crypto regulation occurred when the Generating Effective National Income Using Stablecoins (GENIUS) Act passed the Senate in June 2025, garnering strong bipartisan support and now moving through the House of Representatives. If enacted, this legislation would establish the first comprehensive federal regulations for dollar-backed stablecoins, providing clear protocols for reserves, custody, and oversight. This long-awaited regulatory clarity could stimulate a surge in stablecoin adoption, expanding the user base eager to seek yields on their holdings—similar to the adoption spike Bitcoin experienced following the approval of spot ETFs, which opened the doors to institutional investment. Meanwhile, Europe’s MiCA framework is advancing, imposing strict regulations on stablecoins and preventing platforms from directly offering interest on them. This trend is pushing providers towards tokenized money market funds or compliant lending arrangements that prioritize sustainability and institutional confidence over quick yield gains. Companies like Ondo Finance and Maple are pioneering strategies that align with this regulatory framework.
The Future of Crypto Finance
The ultimate goal is not for cryptocurrencies to supplant traditional banks but rather for them to develop their own financial ecosystems—where programmable money, transparent yields, and around-the-clock settlement become standard expectations for digital asset holders. This pivotal moment is crucial for CFOs and treasury managers to consider. Institutions that engage now—by investing in regulated platforms like Coinbase or tokenized treasury products offered by BlackRock—are not merely speculating; they are conducting institutional-grade trials, building familiarity with emerging infrastructures, and establishing key relationships as regulatory frameworks solidify. The strategy is straightforward: early adopters will secure better partnerships, deeper integrations, and invaluable learning experiences before widespread acceptance occurs. Those who delay until full regulatory clarity is achieved may find themselves entering the market at a disadvantage. The infrastructure for crypto yields is maturing into a new financial benchmark for digital assets. The pressing question is not whether this transition will take place, but rather how to seize the opportunity early and decisively, as those who do not will risk falling behind.