Compound bets $52 million, new leadership on institutional DeFi pivot

Compound Finance approved a $52 million budget and new leadership Monday to court institutional clients after assets locked on the protocol fell to $1.2 billion.

"DeFi is a remarkable innovation; however, it has achieved limited institutional adoption," Aaron Schnarch, former chief executive of Coinbase Custody and now an executive director at Compound, said in a statement. "Current product offerings fall short of meeting the traditional finance bar, especially as it pertains to compliance and technical requirements."

Compound pioneered decentralized lending when it launched in 2018, popularizing yield on crypto deposits without intermediaries, and says it has processed roughly $480 billion in deposits and borrowing volume since inception. Its total value locked peaked at $12 billion in September 2021 but has since fallen to $1.2 billion, DefiLlama data shows, leaving it far behind rival Aave, which holds $14.8 billion. The new team includes Chief Operating Officer Christopher Donovan, previously at the Near Foundation; Chief Product Officer Steven Liu, who scaled Maple Finance from $500 million to $5 billion in assets; and Schnarch, with other appointees joining from Anchorage Digital, HSBC and Broadridge Financial.

The $52 million budget, the largest approved by Compound's decentralized autonomous organization, funds a push into real-world assets, partner integrations and credit infrastructure for traditional markets. The sector is forecast to reach $2.7 trillion by 2030, with tokenized real-world assets among the fastest-growing segments, according to a Standard Chartered projection — though DeFi's total value locked has fallen by more than a third this year to roughly $70 billion after a broad market correction and a run of exploits including the $292 million KelpDAO hack in April.

Industry executives said the move reflects a broader shift in DeFi's user base as retail participation fades and institutions quietly use the rails for settlement.

"Retail participation is a fraction of what it was, and the chain has quietly become a venue for settlement, execution and interaction between financial institutions," Ran Hammer, chief business officer at Orbs, said. "Since DeFi summer, the space has turned into something completely different, essentially a new financial layer for institutions."

Gal Stern, chief business development officer at deBridge, said the combination of real capital and institutional experience is what restores confidence. "Now is a great time for initiatives like these, where real capital goes toward both the structural work and the bringing in of bright minds from the institutional sphere who can explain it to a risk committee in their own language," he said.

Himanshu Sahay, co-founder and chief technology officer of crypto lending firm Arch Lending, cautioned that credentials alone won't win over institutions. "The $52 million and a bench with that much institutional experience is a serious move, and it should improve its execution," he said, but institutions "aren't underwriting teams, they're underwriting structures."

The bet is a test of whether a DeFi protocol built for retail can retrofit itself for institutional compliance and technical standards. If Compound's real-world asset push gains traction, it could narrow the gap with Aave and draw fresh capital into a sector that has shed more than a third of its locked value this year. The next milestone is execution: whether the new leadership can convert the $52 million into products that pass a traditional finance risk committee.

This article is for informational purposes only and does not constitute investment advice.