Institutions managing €800 billion seek crypto token clarity

Representatives of institutions managing about €800 billion in assets raised questions about how crypto network activity and revenue translate into value for investable tokens, according to Brendan Ma, head of investment strategy at the Arbitrum Foundation.

Ma met private bankers and wealth managers during 48 hours of closed-door meetings about crypto. The participants wanted a clearer link between ecosystem activity, business revenue and the digital assets available for investment.

“There’s been business or ecosystem traction that has been divorced from any fundamental case,” Ma told CryptoSlate. Investors were looking for networks that can produce lasting revenue and maintain a profit-and-loss structure that supports investment and reinvestment.

Institutions were considering two separate uses of blockchain technology: investing in crypto assets and using blockchain infrastructure to develop financial products. Some were examining which networks could support tokenization, while others were deciding which assets to place on blockchains.

Stablecoins and U.S. Treasuries were among the first assets to be placed onchain, Ma said. Institutions are now examining private credit, equities, commodities and hedge fund strategies. Private and publicly listed banks have developed plans for products and investments, though many have not disclosed their plans publicly.

Robinhood Chain, an Ethereum layer-2 network built with Arbitrum technology, opened to the public on July 1. From July 1 through Sept. 30, users completed 793.7 million transactions and paid $51 million in network fees, according to blockchain analytics platform growthepie.

Fees were concentrated in a 12-day period from Aug. 30 to Sept. 10, which accounted for 74% of the quarter’s total. Applications on the network generated $591.4 million in revenue during that period. Stablecoin supply rose from $102.3 million at launch to $1.07 billion by Sept. 30.

The data leave investors assessing whether activity will continue after the launch period and how network revenue could benefit the token they buy. Arbitrum’s governance documentation defines ARB as a token that gives holders voting rights on proposals submitted to the Arbitrum decentralized autonomous organization.

Institutions can use blockchain infrastructure such as Robinhood Chain without holding ARB. An investment in ARB would require a connection between the network’s economics and returns for token holders.

Ma expects the institutions he met to become “very active, very knowledgeable” participants in crypto over the next 12 months.