Crypto’s yield gap with TradFi narrows as staking, RWAs surge
News Summary
A new report co-authored by RedStone Oracles and others indicates that the yield gap between cryptocurrency-based products and traditional finance (TradFi) is narrowing, driven by emerging blockchain sectors such as liquid staking tokens (LSTs) and real-world assets (RWAs). Currently, only 8% to 11% of cryptocurrencies offer passive yield-generating models, significantly lagging TradFi assets at 55% to 65%. However, the report highlights that stablecoins, RWAs, and “blue-chip” yield tokens are rapidly closing decentralized finance’s (DeFi) passive income gap. Emerging regulations like the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, passed in July 2025, have established clear rules for stablecoin collateralization and Anti-Money Laundering compliance, boosting demand for yield-bearing stablecoins and RWAs. Yield-bearing stablecoins have seen a 300% year-over-year increase in market capitalization. Ether (ETH) and Solana (SOL) LSTs are also gaining traction by creating more capital efficiency for crypto stakers. The report predicts
Background
For a long time, traditional finance (TradFi) markets have offered significantly higher yield opportunities compared to the nascent cryptocurrency market, primarily due to their mature regulatory frameworks and diverse product offerings. The limited passive yield models and higher volatility in crypto have posed challenges for institutional investors in asset allocation. However, in recent years, innovative products such as Liquid Staking Tokens (LSTs) and Real-World Assets (RWAs) have emerged with the advancement of blockchain technology. LSTs allow users to receive tradable tokens while staking crypto assets, enabling the reuse of capital within other DeFi protocols. RWAs involve tokenizing real-world tangible or intangible assets, making them tradable and usable on the blockchain. In July 2025, the United States passed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, a significant regulatory move by the Trump administration in the digital asset space. This act aims to provide a clear regulatory framework for stablecoins, addressing market concerns about compliance and collateral transparency, thereby paving the way for institutional capital to enter the crypto market.
In-Depth AI Insights
What strategic implications does the GENIUS Act's passage in 2025 under the Trump administration have for the US's position in the global crypto landscape, particularly concerning the narrowing yield gap? - The GENIUS Act signals a formal embrace of stablecoins and RWAs by the US, potentially solidifying its role as a leader in regulated crypto innovation. This move, under a re-elected Trump administration that generally favors deregulation but also seeks to secure US technological supremacy, could attract significant institutional capital, boosting the dollar's digital presence and challenging other jurisdictions like the EU or UK in setting global digital asset standards. - It also mitigates financial stability risks associated with unregulated stablecoins, providing a more predictable environment for large-scale investment, thereby accelerating crypto-TradFi convergence and positioning the US as a critical infrastructure provider in the digital economy. Beyond the reported "exponential growth," what are the underlying structural challenges or potential future headwinds that could impede crypto's ability to truly match or surpass TradFi yield, even with regulatory clarity? - While yield-bearing crypto assets are growing, several structural hurdles remain. Firstly, core blockchain scalability issues, such as Ethereum's high gas fees (despite LSTs mitigating some aspects), can still be a barrier for smaller participants or high-frequency institutional arbitrage. Solana, while offering lower costs, faces its own reliability concerns. - Secondly, despite the GENIUS Act providing a stablecoin regulatory framework, the broader crypto landscape, including DeFi protocols themselves, still lacks uniform global regulatory standards. This could lead to regulatory arbitrage or fragmentation across different jurisdictions, limiting seamless flow of large-scale institutional capital. - Thirdly, market depth and liquidity, especially for nascent RWAs, remain relatively limited. The decades of accumulated depth and breadth in TradFi markets, coupled with extensive derivatives markets, still represent a significant advantage that crypto will take time to bridge. Given the "crypto-as-infrastructure" thesis, what role might Big Tech or TradFi giants play in the crypto yield-bearing asset space in the coming years, and what competitive implications would this have for existing DeFi protocols? - The