Wall Street’s DeFi Shopping Spree: Why TradFi is Finally Buying Governance Tokens
Key Takeaways: The Institutional Institutionalization of DeFi
- Strategic Shift to Direct Ownership: TradFi giants (BlackRock, Citadel, Apollo) have moved beyond equity investments and pilot projects to direct acquisition of governance tokens (UNI, ZRO, MORPHO). This marks a transition from passive observation to active infrastructure ownership.
- “Vendor Alignment” vs. Speculation: This is not a broad bet on DeFi as an asset class. Instead, it is “Vendor Alignment”—institutions are securing stakes in the specific protocols they intend to use as “on-chain pipes” for distributing their tokenized products.
- The Regulatory Thaw: The pivot is driven by a significantly clearer legal landscape in 2025/2026, including the repeal of SAB 121, the conclusion of SEC investigations into major protocols, and the anticipated passage of the CLARITY Act.
- Operational Maturity: Improved institutional-grade custody and governance tools have finally made holding native tokens “compliance-friendly” for large-scale regulated entities.
- The Value Capture Paradox: Despite massive institutional entries, token prices remain stagnant. This is due to a lack of “hard” economic rights (like fee switches) and high FDVs (Fully Diluted Valuations) that currently lack the revenue backing required by institutional standards.
- The “Storefront” Analogy: In this new paradigm, TradFi acts as the “factory” (producing tokenized assets like BUIDL), while DeFi protocols serve as the “storefronts” (providing the liquidity and venues for trade).
- Governance as a Disciplining Force: Institutional participation may solve “DAO apathy.” Professional voters from TradFi are expected to bring more rigor, accountability, and long-term strategic planning to protocol governance.
- The Road Ahead: Expect “Blue-Chip” protocols with high liquidity and clear utility—such as Aave, Sky (formerly Maker), and Ethena—to be the next targets for institutions like Fidelity, BNY Mellon, and Goldman Sachs.
For years, Wall Street’s foray into the cryptocurrency space has been neatly compartmentalized: venture capital rounds, equity investments, and highly controlled pilot programs. But a tectonic shift is underway in the institutional crypto landscape. Traditional finance (TradFi) giants are no longer just partnering with decentralized finance (DeFi) protocols—they are outright buying their governance tokens.
In a whirlwind few days earlier this month, BlackRock, Citadel Securities, and Apollo Global Management all unveiled deep ties to DeFi tokens. BlackRock snapped up UNI tokens while integrating its tokenized Treasury fund, BUIDL, onto the chain via UniswapX; Citadel Securities backed LayerZero’s “Zero” blockchain launch, securing ZRO tokens in the process; and Apollo (or its affiliates) inked a massive deal with Morpho, aiming to acquire up to 90 million MORPHO tokens—roughly 9% of the total supply—over the next 48 months.
To the untrained eye, this looks like Wall Street finally betting on DeFi tokens as the ultimate high-beta asset class. But after speaking with veteran investors and insiders, a different narrative emerges. This isn’t a speculative frenzy; it’s a strategic land grab for infrastructure.
The “Vendor Alignment” Play
“Every company is buying the token of a specific protocol they intend to use as infrastructure. It’s vendor alignment, not portfolio allocation,” explains Jake Brukhman, Founder and CEO of CoinFund.
The thesis is simple: TradFi institutions are manufacturing tokenized financial products, and they need robust on-chain venues to distribute them. Lex Sokolin, Co-founder of Generative Ventures, aptly describes TradFi as the “factories” and crypto protocols as the “storefronts.” Buying the token of the storefront you rely on builds brand alignment and smooths operations, even if the financial outlay is just a fraction of a firm’s massive balance sheet.
Richard Galvin, CIO at Digital Asset Capital Management and a Goldman Sachs and JPMorgan alum, views this as a definitive structural shift. “Firms of this size do not allocate capital on a whim,” Galvin notes. “Having spent 20 years in TradFi, I know the internal governance, risk, and compliance hurdles required to greenlight these investments. These are deliberate strategic decisions, not token gestures.”
However, others urge caution. Anirudh Pai of Robot Ventures points out that until these token allocations represent a meaningful percentage of institutional AUM, calling it a complete paradigm shift might be premature.
The Regulatory and Custodial Thaw
Why is this happening now, in early 2026? The answer lies in the quiet maturation of institutional plumbing and a vastly improved regulatory climate over the last 12 to 24 months.
Operationally, institutional-grade custody tools and governance controls have advanced to a point where holding native tokens is finally palatable for compliance departments, according to 1kx Founding Partner Lasse Clausen.
Legally, the dark clouds are parting. Amir Hajian, a researcher at Keyrock, points to a cascade of tailwinds: the early-2025 repeal of SAB 121 (which previously made crypto custody prohibitively expensive for public companies), the SEC dropping its probes into heavyweights like Uniswap, Coinbase, and Aave, and the passage of the GENIUS Act providing a federal stablecoin framework. Furthermore, the SEC’s “Project Crypto” four-tier taxonomy has strongly signaled that most governance tokens avoid the dreaded “security” label. With the highly anticipated CLARITY Act potentially on the horizon, TradFi is front-running the final regulatory green light.
The Missing Link: Value Capture and “Soft Rights”
Despite the monumental news, the price action of DeFi tokens has remained stubbornly muted. Part of this is due to recent macroeconomic headwinds and a sluggish Bitcoin, but the real culprit is structural: tokenomics haven’t changed.
Currently, governance tokens are not equity. They lack legal recourse on protocol assets and carry no fiduciary duties. Boris Revsin, Partner at Tribe Capital, highlights that until tokens actually control cash flows or meaningful economic levers—like enacting “fee switches”—they remain quasi-social assets rather than contractual ones.
“The paradox,” Brukhman points out, “is that most DeFi tokens historically have had zero revenue capture. Value flows to Liquidity Providers (LPs) and devs, not token holders, while persistent VC unlocks create a permanent overhang of sell pressure.”
Institutions allocating capital in 2026 demand proof of cash flow. Until DeFi protocols turn on fee switches, curb token inflation, and slow down VC emission schedules, massive capital rotation into DeFi will remain capped. Pratik Kala of Apollo Crypto adds that without these changes, some DeFi projects acting like traditional banks are currently trading at absurd P/E ratios of up to 80x, making them fundamentally overvalued.
What Comes Next?
As TradFi continues to infiltrate DeFi governance, fears of centralization are naturally rising. Yet, many see a silver lining: professionalization. DAO voting participation is notoriously abysmal, often lingering in the single digits. Institutional players, accustomed to rigorous proxy voting in equity markets, could bring desperately needed oversight to DAO treasuries.
Looking forward, the consensus is clear: more TradFi titans will follow suit, but they will be surgical in their strikes. Market watchers expect Fidelity, Franklin Templeton, Goldman Sachs, and BNY Mellon to be the next movers, specifically targeting blue-chip, highly liquid protocols tied to stablecoins, Real World Assets (RWAs), and lending. Names like Aave, Sky, Maple Finance, Ethena, and EtherFi are frequently cited as prime targets.
Wall Street has officially arrived in DeFi. They aren’t here to pump your bags—they’re here to buy the pipes. And once the CLARITY Act passes and protocol fee switches are flipped, the line between a traditional equity share and a DeFi governance token may blur forever.
Disclosure: The views expressed in this article are based on market commentary and do not constitute financial advice.