Bitcoin-Holding Institutions Seeking Yield, DeFi Capabilities

Institutional interest in Bitcoin is shifting beyond passive exposure as infrastructure for yield generation and decentralized finance (DeFi)-style activity.

With new platforms like Rootstock and Babylon building bridges between Bitcoin and yield-bearing protocols, some asset managers and corporate treasuries have begun to view the asset as something more than digital gold.

“People holding bitcoin BTC$107,305.13 — whether on balance sheet or as investors — increasingly see it as a pot just sitting there,” said Richard Green, director of Rootstock Institutional, a new team set up by the Bitcoin sidechain project to focus on the institutional market. “They still want it to be a utilized asset. It can’t just sit there doing nothing; it needs to be adding yield.”

That mindset marks a notable evolution from Bitcoin’s early institutional narrative of value preservation. Green said in an interview with CoinDesk that professional investors now expect their holdings to “work as hard as possible” within their risk mandates, mirroring the yield expectations that have long driven adoption in other digital asset ecosystems like Ethereum or Solana.

The shift is being facilitated by Bitcoin-native solutions that allow yield generation without leaving the network. Rootstock, which enables smart contracts secured by Bitcoin’s hash power, has seen increasing demand for collateralized products and tokenized funds that return Bitcoin-denominated yield.

“Our role is to guide institutions through that,” Green said. “We’re seeing demand for BTC-backed stablecoins and credit structures that let miners, remittance firms, and treasuries unlock liquidity while staying in Bitcoin.”

For many corporates, the case is practical as much as philosophical. “If you’re a treasury company and you’re custodying bitcoin, you’re losing 10–50 basis points on that cost,” Green noted. “You’re wanting to nullify that. Now the options are secure and safe enough that you don’t have to go into some crazy DeFi looping strategy.”

Such bitcoin-denominated yield opportunities — sometimes offering 1–2% annual returns — are increasingly viewed as acceptable by conservative investors seeking to offset custody drag without taking on exposure to wrapped or bridged assets.

Still, yield remains thin compared with Ethereum’s staking economy. “We assessed 19 different protocols or tech platforms that had advertised bitcoin staking or yield,” said Andrew Gibb, CEO of Twinstake, a staking infrastructure provider. “The tech is there, but institutional demand takes time to come through.”

Twinstake runs infrastructure for Babylon, a project enabling Bitcoin-based restaking for proof-of-stake networks. While technically functional, Gibb said the often trivial returns make for a tough sell. “If you hold Bitcoin, do you really hold it because you want an extra 1% yield? That’s the psychological hurdle,” he told CoinDesk in an interview.

Some services aim to overcome that by framing yield generation as non-lending, using mechanisms like time-locking Bitcoin for yield without rehypothecation.

“You still have it — it’s just time-locked,” Gibb said. “That’s how some projects are selling it, but then the yield needs to be meaningful to justify that lockup.”

Even if adoption is gradual, it seems institutional bitcoin holders are no longer content with passive appreciation alone. As secure, Bitcoin-native yield products proliferate, the world’s largest digital asset is inching toward productivity — without compromising its core principle of self-custody.

“It’s about operating in a world where bitcoin yield is apparent,” Green said. “And receiving that yield back in BTC.”