10 December 2025
Crypto has built a solid infrastructure for returns in recent years, with mechanisms such as staking on Ethereum and Solana, yield-generating stablecoins, DeFi lending protocols, and tokenized government bonds. Despite the facilities being in place and annualized yields (APYs) already active, only 8% to 11% of the total crypto market currently generates returns. By comparison, 55% to 65% of traditional financial assets (TradFi) offer returns. The sharp discrepancy isn't a matter of problematic products, but rather a lack of transparency.
According to recent analyses by RedStone, there are on average around $300 billion to $400 billion in yield-generating crypto assets, resulting in that 8% to 11% share of a total market capitalization of $3,55 trillion. However, this percentage may be overstated, as some positions are double-counted when staked assets are also deposited in DeFi protocols. The benchmark encompasses a wide range of investments, from corporate bonds to dividend stocks and money market funds. TradFi's advantage lies not in exotic instruments, but in a century of standardized risk assessments, mandatory disclosures, and stress tests that allow institutions to evaluate yield products on comparable terms.
While crypto offers the products, the comparability is lacking, which keeps institutional capital on the sidelines even when returns exceed tens of percent.
The passage of the GENIUS Act established a federal structure for payment stablecoins, requiring full reserve coverage and oversight under the Bank Secrecy Act. This legal clarity has led to approximately 300% year-over-year growth in yield-generating stablecoins, a segment that had previously stagnated under regulatory uncertainty. While the law does not impose risk transparency requirements, it focuses on reserve composition and compliance, eliminating the question of whether stablecoins might exist in a legal gray area.
This shift has allowed issuers and platforms to move from "Is this allowed?" to "How can we scale this?", empowering institutions to ask more challenging questions about asset quality, collateral chains, and counterparty risk. Independent reporting on the legislation reflects the same pattern: regulation reduces uncertainty, but institutions still require more robust risk metrics before increasing allocations. The law is necessary, but not sufficient.
What's missing is the tooling that allows a treasury desk or asset manager to compare the risk-adjusted returns of a yield-generating stablecoin with those of a money market fund, or to evaluate the credit exposure of a DeFi lending pool against a ladder of corporate bonds. TradFi offers that tooling with credit ratings, prospectuses, stress scenarios, and liquidity pools. Crypto, on the other hand, offers APY leaders and TVL dashboards, which show where returns are generated, but not the underlying risks.
RedStone succinctly states the problem: “The barrier to large-scale institutional adoption is risk transparency.” What does that mean? First, there's no comparative risk score for yield products. A 5% return on staked ETH entails different liquidity, slashing, and smart contract risks than a 5% return on a stablecoin backed by short-term government bonds. However, a standardized framework to quantify these differences is lacking.
Second, the qualitative analyses of assets are inconsistent. DeFi protocols specify collateral ratios and liquidation thresholds, but tracking rehypothecation requires combining on-chain forensics with off-chain custodian reports. A third shortcoming concerns the dependencies on oracles and validators, which rarely receive the same rigorous disclosure as is applied to operational risks in DeFi.
Products that rely on a single price feed or a small set of validators carry concentration risk that isn't visible in user dashboards. Furthermore, the double-counting issue explicitly addressed by RedStone means that when staked ETH is wrapped, deposited in a lending protocol, and then used as collateral for another position, the TVL (total value locked) metrics increase, causing the percentage of "yield-generating" assets to overstate actual capital.
Traditional finance accounting rules separate principal from derivative exposure. Crypto's on-chain transparency creates the opposite problem: everything is visible, but merging that data into meaningful risk metrics requires infrastructure that doesn't yet exist on a large scale.
The next phase isn't about inventing new yield products. Staked blue-chip assets, yield-generating stablecoins, and tokenized government debt already span the risk spectrum, ranging from variable to fixed, and from decentralized to custodial. What's needed is a measurement layer: standardized risk disclosures, independent audits of collateral and counterparty exposure, and uniform treatment of rehypothecation and double counting in reported metrics.
This isn't a technical problem, as on-chain data is inherently verifiable, but it requires collaboration between issuers, platforms, and auditors to build the frameworks that institutions consider credible. The infrastructure for yield in crypto already exists. Staking on proof-of-stake networks provides predictable returns tied to network quality. Yield-generating stablecoins offer dollar-based income with varying levels of reserve transparency. DeFi protocols present variable rates driven by supply and demand for specific assets. The 8% to 11% penetration rate doesn't indicate a lack of yield opportunities in crypto, but rather that the risks associated with these opportunities are unclear to global capital allocators.
TradFi's successful penetration into returns isn't necessarily due to the inherent safety of traditional assets, but to the fact that their risks are measurable, public, and comparable. Until crypto builds that layer of measurement, the adoption bottleneck won't be solely product shortages or regulatory ambiguity, but the inability to identify the risk associated with returns.
What exactly are yield-generating crypto assets?
Yield-generating crypto assets are digital assets that generate returns through mechanisms such as staking, where investors stake their assets to verify networks, or through lending, where they lend their assets to other users in exchange for interest.
Why is there such a big yield difference between crypto and traditional financial assets?
The difference stems from the need for standardization in risk policies and transparency. While traditional assets have detailed risk assessments and comparison mechanisms, these are lacking in the crypto space, making institutional investors hesitant to allocate significant amounts.
What are the main obstacles to the adoption of yield products in the crypto market?
The main obstacles are poor risk transparency, inconsistent asset quality reporting, and a lack of standardized risk and return metrics. This makes it difficult for investors to make informed decisions about their allocations. It is crucial that the industry addresses these shortcomings to promote broader adoption.
Bitcoin (BTC)
Ethereum (ETH)
XRP (XRP)
