With progress in stablecoin regulation in the US and Hong Kong and global interest rates declining, quieter changes may be underway within DeFi. The era led by retail is shifting towards institutional capital and algorithmic allocators.
**Phoenix Labs** co-founder and CEO **Sam MacPherson** stated that capital is nearing a turning point in how it enters the on-chain market and is utilized.
“We are truly reaching a turning point where institutions are coming on-chain at scale,” said Macpherson in an interview with Yellow.com.
In his view, this transition will redefine the meaning of 'DeFi adoption'. It means that protocols optimized for regulatory compliance constraints, institutional balance sheet realities, and system-level risk management will be required over retail growth loops.
Institutions entering on-chain at scale
Macpherson's key macro outlook is that institutional participation will significantly expand from here, and the winners will be the infrastructure that facilitates the connections rather than consumer apps.
He explained that he is building the strategy of Phoenix Labs around these expectations. The next generation of dominant on-chain liquidity pools will likely be where institutions can actually connect and where they have a familiar risk framework.
Thus, he referred to Spark as the “institutional connectivity layer.” Institutional borrowers often require functionalities that purely permissionless markets do not provide, such as KYC/AML procedures, fixed-rate products, and operational monitoring.
Banks as partners, not threats
Macpherson disagreed with the assertion that bank-issued stablecoins automatically encroach on decentralized finance.
Instead, he argued that even if banks enter the on-chain market, the liquidity rails of DeFi will still be needed, and it is unrealistic to compete directly with the balance sheets of banks.
“If we wage a liquidity war with banks, we cannot win,” he said. “But when banks come on-chain, this is not their space. We can help them enter DeFi.”
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Interest rate cuts could revive crypto-specific yields
There is a perception that as tokenized T-bill yields compress and policy rates ease, on-chain savings yields will either fall or bear greater credit risk.
Macpherson stated that low interest rates tend to increase risk appetite, which in turn increases demand for leverage and expands crypto-specific borrowing and funding activities.
“Interest rate cuts will trigger more crypto speculation,” he said. He explained that rising demand for leverage could support rather than undermine on-chain interest rates.
If this logic holds, the next yield regime may be more influenced by how quickly leverage demand revives in a accommodative monetary environment rather than a simple pass-through of risk-free rates.
AI agents, governance realism, and the trade-offs of compliance
Macpherson anticipated that AI agents would become key market participants. He argues that more sophisticated asset allocators could improve capital efficiency and reduce emotion-based volatility.
“I believe that in the not-too-distant future, the majority of actors actively engaging on the blockchain will be AI agents,” he said.
He also described decentralized governance as an endless experiment.
If it fails to effectively adjust at scale, the system could revert to a more centralized form in terms of operational structure, even if the underlying products continue to function.
“If we fail, there is a possibility that we will revert to a more corporate-like structure,” he said.
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