Why Institutional FOMO Is Now the Biggest Force in Crypto

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Back in 2022, Ava Labs had an internal mandate to get banks, asset managers and financial infrastructure companies to take Avalanche seriously. At the time, that involved convincing skeptical institutions that blockchains were worth their attention. 

How the tables have turned. Four years later, Ava Labs today has its hands full helping institutions figure out how to best use blockchains for digitally trading, moving and commoditizing all kinds of real world goods. Avalanche now serves as the backbone for more than $1.3 billion in tokenized real world assets, brought to the blockchain by major financial firms like BlackRock, Citi, JP Morgan and KKR.

"There's just been such a large degree of institutional FOMO that has really started to permeate the industry," Morgan Krupetsky, VP of onchain finance at Ava Labs, said on StrataMedia’s Talking Tokens podcast. 

Krupetsky says the institutional conversations she is having today sound nothing like they did even two years ago. Back in 2024, the question was whether blockchains were worth exploring; now, it's how to scale what's already been proven through pilots to production.

"I think we've definitely crossed the chasm in terms of buy-in that this technology is here to stay," she said. "It's not pilots and POCs just to say you've done something. The idea is really to ultimately scale to an in-production deployment."

The sales cycle, however, remains long. Krupetsky said Ava Labs had to work with JP Morgan and Broadridge for roughly two years each before either institution was ready to move. "The implementation itself, once both sides are resourced and aligned, moves faster than people expect. Getting there is the slow part."

Going forward, she’s most interested in institutions actually putting capital at risk onchain, trading and transacting with each other in ways that prove the technology is functionally better than legacy rails. "I don't think we've come to that yet. But in five years, we'll start to see the ins and outs of the plumbing being upgraded."

Of all the asset classes Krupetsky tracks, private credit is the one she believes is most suited to blockchains. "Unlike equities or other areas, [private credit] is still a pretty inefficient market: It's opaque; it's non-standardized." This isn’t the first time a guest on the show has mentioned private credit as an untapped territory. CEOs from Loopscale and Euler have mentioned how the credit markets were a huge opportunity, both for different reasons.

For Krupetsky, she pointed to specific pain points such as double pledging of collateral, the inability to catch fraud in real time, or compliance that can't be managed dynamically. "Those are real issues that can be solved by this technology."

The distinction she draws is about where in the stack tokenization gets introduced. Most efforts today apply the technology at the fund level, after assets are already formed and managed traditionally. Krupetsky sees tokenization playing a role upstream as well.

"If you can introduce the tech at the point of native, onchain loan origination, the source of birth of the asset is the blockchain. With that, you can proceed with full end-to-end onchain servicing and verification, because every relevant party is now referencing the same source of truth."

Some people don’t agree with this thoughtprocess, that everything should be through one stack - and it’s something we’ve seen argued on both sides of the coin. Some thing it should be all integrated under one stack for cohesion, while others see the fragmentation as an advantage to have more tailored approaches.

She contrasted that with equities, where tokenization will require a much greater overhaul of the existing market structure. Private credit, by comparison, isn't traded in the same way, and has fewer structural dependencies, making it a great candidate for near-term transformation.

In general, the credit market is not known for going fast and today, it requires a lot of paperwork, but as the technology advances, it could change the way things have historically been done.

Ava Labs’ business development approach has been deliberate around this. The firm’s tokenization lead maintains an outreach list of roughly 1,500 fintechs that its team is actively plugging into its ecosystem of tokenized assets. The goal is to look beyond crypto-native firms. 

"That means net-new capital, net-new users, generally stickier users and non-mercenary users."

Check out the next section for more details and the full episode.

For today’s episode, I interviewed Morgan Krupetsky, VP of Onchain Finance at Ava Labs, to break down where institutional adoption of blockchain actually stands right now. 

They discuss why Morgan thinks the industry has officially crossed the chasm from experimental pilots to in-production deployments. Morgan deep dives into the embedded finance stack she's seeing resonate across global markets, why private credit and asset-backed finance are better suited for blockchain rails than equities, and why the deals being announced today were quietly in the works 12 to 18 months ago.

TIMESTAMPS

00:00 The Shift in Institutional Crypto Adoption

10:08 Understanding Institutional Strategies

20:22 Tokenization and Its Impact on Financial Markets

30:07 Stablecoins: The Gateway to Onchain Finance

40:54 Future Innovations in Onchain Finance

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Please note this content is for informational and educational purposes only. Any views shared should not be considered financial advice, nor should it be used to make investment decisions. Cryptocurrencies are high risk and you should consult a financial professional before making any financial decisions. Make sure you do your own research. We may have a direct or indirect financial interest in content mentioned in this newsletter.