Crypto has spent years building yield infrastructure, such as staking on Ethereum and Solana, yield-bearing stablecoins, DeFi lending protocols, and tokenized Treasuries.
The pipes already exist, the APYs are live, yet only 8% to 11% of the total crypto market is generating returns today, compared to 55% to 65% of traditional financial (TradFi) assets, according to RedStone’s latest analysis.
That penetration gap is not a product problem, but rather a disclosure problem.
RedStone compares approximately $300 billion to $400 billion in yield-bearing crypto assets against a total market cap of $3.55 trillion to arrive at that 8% to 11% figure, with a caveat: the proportion is likely overstated because some positions are counted twice when staked assets are also deposited into DeFi protocols.
The comparison benchmark covers a wide range of investments, including corporate bonds, dividend stocks, money market funds and structured credits.
The advantage of TradFi is no exotic instruments. It’s a century of standardized risk assessments, mandatory disclosure rules and stress-testing frameworks that allow institutions to compare return products on like terms.
Crypto has the products, but not the comparability, and that mismatch keeps institutional capital on the sidelines even as returns run into double digits.
Policy as a catalyst, not as a solution
The GENIUS Act established a federal framework for payment stablecoins, requiring full reserve support and oversight under the Bank Secrecy Act.
RedStone pointed to this clarity as the catalyst behind the roughly 300% annual growth of yield-bearing stablecoins, a segment that had stalled under regulatory uncertainty.
The law does not mandate risk transparency, but regulates the composition and compliance of reserves, eliminating the binary question of whether stablecoins could operate in a legal gray zone.
This shift allowed issuers and platforms to move from ‘is this allowed?’ to “how do we scale this up?” and created the conditions for institutions to start asking more challenging questions about asset quality, collateral chains and counterparty risk.
The independent reporting of the law reflects a similar dynamic: Regulation reduces uncertainty, but institutions still need more robust risk measures before they can scale up their allocations. The law is necessary, but not sufficient.
What’s missing is the machinery that allows a treasury desk or asset manager to compare the risk-adjusted return of a yield-bearing stablecoin to that of a money market fund, or to assess the credit exposure of a DeFi lending pool against a ladder of corporate bonds.
TradFi has that machine, with credit ratings, prospectuses, stress scenarios and liquidity buckets. Crypto has APY leaderboards and TVL dashboards, which indicate where yield is generated, but not what risks underlie it.
Transparency deficit
RedStone’s analysis sums up the problem in one sentence: “The barrier to institutional adoption at scale is risk transparency.”
Find out what that means in practice. First, there is no comparable risk score for return products. A 5% return on staked ETH carries different liquidity, savings, and smart contract risks than a 5% return on a stablecoin backed by short-term government bonds.
However, there is no standardized framework to quantify these differences.
Second, asset quality breakdowns remain inconsistent. DeFi protocols reveal collateral ratios and liquidation thresholds, but tracking rehypothecation requires merging on-chain forensics and off-chain custodian reports.
Third, oracle and validator dependencies are rarely disclosed with the rigor that TradFi applies to operational risk.
A yield product that relies on a single price feed or small validation set carries a concentration risk that doesn’t show up in user-facing dashboards.
Then there is the problem of double counting that RedStone explicitly identifies. When the ETH is taken, deposited into a lending protocol and then used as collateral for another position, the TVL statistics increase and the “return bearing” percentages overestimate the actual capital deployed.
Traditional financial accounting rules separate principal and derivative exposures. Crypto’s on-chain transparency creates the opposite problem, where everything is visible, but aggregating it into meaningful risk metrics requires infrastructure that doesn’t yet exist at scale.
Closing the gap
The next stage is not about coming up with new yield products. Deployed blue chip assets, interest-bearing stablecoins and tokenized sovereign debt already cover the risk spectrum, ranging from variable to fixed, and from decentralized to custody.
What is needed is the measurement layer: standardized risk disclosure, third-party audits of collateral and counterparty exposure, and uniform treatment of rehypothecation and double counting in reported metrics.
This is not a technical problem, as on-chain data is auditable by design, but it does require coordination between issuers, platforms and auditors to build frameworks that institutions consider credible.
Crypto yield pipes now exist. Staking on proof-of-stake networks provides predictable returns associated with network security. Yield-bearing stablecoins offer dollar income with varying degrees of reserve transparency.
DeFi protocols offer variable rates determined by supply and demand for specific assets. The penetration rate of 8% to 11% is not a signal that crypto does not offer return opportunities.
It is a signal that the risk associated with these opportunities is not visible to the allocators who control most of the world’s capital.
TradFi’s yield penetration has not occurred because traditional assets are inherently safer, but rather because their risks are measured, disclosed, and comparable.
Until crypto builds that layer of measurement, the adoption bottleneck will not be product gaps or regulatory ambiguity, but the inability to answer what is at risk to yield.
