A new report says the TVL in DeFi vaults has grown 28x over the past 12 months, jumping from under $150M in June 2024 to more than $4.4B today – outpacing the crypto market's bull-run expansion.
Around a fifth (19.8%) of vaults – pre-packaged and professionally managed investment approaches within decentralized finance platforms – are dominated by tokenized real-world assets (RWAs) like treasuries and private credit funds. But single-asset vaults are also on the up.
The report from staking platform Kiln says some USDC supply vaults on the Morpho decentralized lending protocol hold "several hundred million dollars" – on par with a mid-sized money-market fund.
TradFi participation is growing. Apollo Global Management, a US investment firm with more than $750 million in assets under management, launched its Apollo Diversified Credit Securitize Fund (ACRED) in May.
Now live on Solana, the fund is a tokenized version of Apollo's off-chain Diversified Credit Fund (ADCF). Instead of investing directly in the traditional fund, investors can buy tokens that represent ownership.
The advantage of investing in a traditional fund via tokens is speed and simplicity. Tokenization enables daily net asset value redemptions to happen faster – with less processing and reduced paperwork.
Kiln says ACRED is currently delivering yields of around 16% on-chain. Meanwhile, Coinbase has processed over $350 million in Bitcoin-backed loans through Morpho since the launch of its partnership in January 2025.
Why are DeFi vaults becoming popular?
To date, DeFi has been dominated by tech-savvy early adopters, risk-seekers not put off by sparsely-regulated markets or the technical complexity of staking and wallet setups.
Vaults give mature investors a crypto-native way to gain exposure to blockchain investment opportunities and DeFi passive income, much like spot Bitcoin ETFs have delivered for crypto trading. The trigger for vaults’ sudden surge seems to be ERC-4626, an Ethereum token standard that arrived in May. It sets out a modular approach to creating yield-bearing vaults, with clear parameters and implementation steps.
Kiln researchers believe the changes put vaults on the road to regulatory accommodation.
"Because ERC-4626 contracts allow users to retain direct custody of their assets, many of the classical intermediary rules like capital charges, segregation of assets, and qualified-custodian rules apply only at the fiat layer, not inside the vault itself. We expect the EU to look again at DeFi primitives and introduce proportional safeguards around leverage limits, oracle reliability, and on-chain disclosures rather than copy-pasting broker-dealer rules."
Data from blockchain analytics platform Dune suggests there have been more than 50 tokenized vault deployments each week since ERC-4626's introduction.
An echo of crypto’s spot ETF liftoff
In a recent post, researchers at Delphi Capital argued the time is right for DeFi to seek a wider audience as it has “largely exhausted its early addressable market; that segment of users willing to interact with protocols directly through self-custodial wallets."
To transition to a new growth phase, Delphi says DeFi needs its own "ETF moment," a reference to January 2024 when the US SEC gave a long-anticipated green light to spot Bitcoin exchange-traded funds.
The market could use a spur. Figures from DeFiLlama put total DeFi TVL at about $153 billion currently, down from over $180 billion in 2022. That’s despite buoyant demand for digital assets and rapid expansion in the circulating supply of stablecoins.
The take away
DeFi vaults are being hailed as another door opener for TradFi's embrace of crypto, enabling exposure to yields without the risk of owning crypto directly.
They operate like decentralized asset managers, but with key advantages: they're permissionless, liquid, and non-custodial. Investors can enter or exit at will, while curator incentives scale as TVL grows (or wanes).
If they can capture just 1–2% of global money-market and cash-sweep assets, experts see vault TVL moving past the half-trillion-dollar mark by 2030.
Are programmable yield wrappers the key to finance's on-chain future? Standardized vault design through modules defined by ERC-4626, a warming regulatory environment, and more TradFi success stories could lay the rails for that destination.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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