In 2025, the cryptocurrency industry entered a new phase characterized by a surge in institutional investor participation. After years of caution and skepticism, large companies are now allocating significant capital to digital assets.
What has changed that institutions, which previously distanced themselves from this industry, have eventually entered it? BeInCrypto discussed the factors driving this change with Aishwary Gupta, Global Head of Payments and Real-World Assets (RWA) at Polygon Labs. Gupta explains how the influx of institutional investment is currently leading the market and the implications of this change.
Institutions lead the influx of cryptocurrency... Why?
According to Gupta, institutions currently account for about 95% of total cryptocurrency inflow. On the other hand, the proportion of retail investors has dropped to around 5-6%. This transition indicates a shift from a previously retail-led market structure driven by high interest to a more structured finance shaping the market.
Large asset management firms such as BlackRock, Apollo, and Hamilton Lane have begun to allocate about 1 to 2% of their portfolios to cryptocurrency. They are introducing ETFs and piloting tokenized investment products on-chain.
Gupta explains that the cause of change is not a shift in Wall Street's mentality, but rather the infrastructure supporting institutional activity. He cited Polygon as an example.
“The live DeFi transaction with JPMorgan under the Monetary Authority of Singapore (MAS), Ondo's tokenized treasury bonds, and the regulated staking partnership with AMINA Bank have demonstrated that the infrastructure driving DeFi can also power global finance. Polygon has enabled existing financial institutions to utilize public blockchains thanks to scalability and low-cost transactions. Institutions can now trade directly on Ethereum-compatible public networks that meet audit and regulatory standards without the need to experiment in a sandbox.” - Aishwarya Gupta, Global Payments and RWA Lead at Polygon Labs
Gupta mentions two main directions for institutions entering the cryptocurrency market: pursuing profit and diversification, and improving operational efficiency. The first wave involved seeking dollar-denominated returns through tokenized treasury bonds, bank-managed staking, etc. This provided a familiar yet compliant framework for revenue generation.
He explained that the second wave is driven by the efficiency of blockchain. Faster payments, liquidity sharing, and programmable assets have encouraged large financial networks and fintech companies to experiment with tokenized fund structures and on-chain transfers.
Institutional leadership... Retail exit, the direction of cryptocurrency?
He also emphasized the causes of retail investors' exit. Gupta noted that retail investors have left the market largely due to losses experienced in speculative cycles like meme coins and unrealistic profit expectations. This decline in trust has led to the exit of small investors. However, he does not view this as a permanent or structural exit.
“If more systematic and regulated products restore retail investor confidence, they will return to the market,” Gupta stated to BeInCrypto.
However, there are concerns that the increase in institutional participation may weaken the spirit of decentralization in cryptocurrency. Gupta argues that as long as public open networks remain the foundation, maturity and decentralization are not contradictory.
According to him, decentralization can only be threatened when networks sacrifice openness. The influx of new participants itself is not a threat.
“When built on public infrastructure… if it is not a closed ecosystem, institutional adoption does not lead to the centralization of cryptocurrency but rather legitimizes it. Traditional finance (TradFi) is not replacing cryptocurrency but joining on-chain. This is not a phenomenon of acquisition and surrender but an integration of infrastructure on blockchains that host DeFi, NFTs, treasury bonds, ETFs, and institutional staking.” - Aishwarya Gupta, Global Payments and RWA Lead at Polygon Labs
When asked whether institutional leadership prioritizing compliance over experimentation could slow innovation, Gupta acknowledged this tension. However, he stated that ultimately, this process could benefit the industry.
“The attitude of ‘move fast and break things’ has fostered high creativity, but at the same time has led to significant losses and backlash from regulators. Institutions move slowly and focus on regulatory compliance. While this can burden creativity, if approached correctly, it can lead to innovation without stifling it, but rather advancing it. Founders should make compliance the starting point of innovation. The pace of progress may slow, but it will develop more robustly and scalably.” - Aishwarya Gupta, Global Payments and RWA Lead at Polygon Labs
Institutions are expanding their entry into cryptocurrency... What’s the next step?
Looking ahead, Gupta emphasizes that the increase in institutional investor participation should be viewed not as Wall Street acquiring cryptocurrency, but as joining an increasingly diversified ecosystem.
“The current market is operated by institutional-grade liquidity, which moves slowly but generates profit with more thorough risk management. The days when retail investors dominated the market chasing high interest and FOMO on centralized exchanges like in 2017 are over. Emotional trading has decreased. As capital shifts towards long-term profit generation rather than speculation, volatility is expected to decrease. Cryptocurrency is increasingly recognized as financial infrastructure, viewed not merely as an asset class but as the foundation of the market.” - Aishwarya Gupta, Global Payments and RWA Lead at Polygon Labs
He anticipates that the tokenization of real-world assets (RWA) will expand significantly, and as trading gradually becomes more regulated, market stability will increase. He also predicts that as traditional finance enters the phase of developing on-chain strategies, regulatory connectivity is likely to strengthen.
As Gupta explores ways for compliant institutions to participate in on-chain revenue generation, he expects the growth of institutional staking and yield-generating networks to continue. He also believes that the expansion of interoperability will emerge as a key issue, and public chain tools that facilitate asset movement between different rollups will become increasingly important alongside the expansion of institutional activities.
