As stablecoin regulation advances in the U.S. and Hong Kong and global interest rates trend lower, a quieter shift may be underway inside DeFi, where the retail-led era could be giving way to institutional capital and algorithmic allocators.
Sam MacPherson, co-founder and CEO of Phoenix Labs and a core contributor of Spark, said the market is nearing a turning point in how capital will enter and use on-chain markets.
“We’re reaching an inflection point where institutions are really going to come on-chain in size,” MacPherson told Yellow.com an interview.
In his view, that transition will reshape what “DeFi adoption” means, pushing protocols to optimize for compliance constraints, balance-sheet realities, and system-level risk management rather than retail growth loops.
Institutions Are Coming On-Chain In Size
MacPherson’s core macro call is that institutional participation will expand materially from here, and that the winners will look less like consumer apps and more like connective tissue.
He framed Phoenix Labs’ strategy as building around that expectation, however, the next set of dominant on-chain liquidity pools may be the ones that institutions can actually plug into, with risk frameworks that resemble what they already recognize.
This is also why he described Spark as an “institutional connectivity layer,” arguing that institutional borrowers often need features that purely permissionless markets do not provide, including KYC/AML processes, fixed-rate products, and operational monitoring.
Banks As Partners, Not Existential Threats
MacPherson rejected the idea that bank-issued stablecoins automatically crowd out decentralized finance.
Instead, he argued that banks entering on-chain markets will still need DeFi liquidity rails, and that competing head-on with bank balance sheets would be unrealistic.
“If we’re getting into a liquidity war with a bank, we’re not going to be able to win that,” he said. “But when banks come on-chain, this is not their space. We can help facilitate their entry into DeFi.”
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Lower Rates Could Revive Crypto-Native Yields
With tokenized T-bill yields compressing and policy rates easing, the assumption is that on-chain savings yields must fall or take on more credit risk.
MacPherson said lower rates can increase risk appetite, which tends to increase leverage demand, which can lift crypto-native borrowing and funding activity.
“Lowering interest rates will drive more crypto speculation,” he said, describing a path where increased leverage demand supports on-chain rates rather than undermines them.
If that thesis holds, the next yield regime may be less about pass-through of risk-free rates and more about how quickly leverage demand returns during easier monetary conditions.
AI Agents, Governance Realism, And The Compliance Trade-Off
MacPherson said he expects AI agents to become major market participants, arguing that more sophisticated allocators can improve capital efficiency and reduce emotion-driven volatility.
“I suspect actually AI agents will be the main operators on blockchains in the not too distant future,” he said.
He also described decentralized governance as an open-ended experiment.
If it fails to coordinate effectively at scale, he suggested systems may revert toward more centralized operational structures, even if the underlying product continues to function.
“It’s possible that if it’s not successful, we revert back to more of a corporate structure,” he said.
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