Compound founder Robert Leshner says ‘institutions aren’t coming’ to DeFi

When institutional investors jump headlong into crypto, their trillions of dollars will send token prices soaring and vindicate an asset class long-maligned as Monopoly money by skeptical outsiders, some proponents have long believed.

But that day isn’t really coming, according to Robert Leshner, the founder of Compound, a multibillion-dollar lending protocol on Ethereum.

“The institutions aren’t coming,” he said during a panel Tuesday at the Permissionless conference in Austin, Texas. “I personally don’t think that the institutions are that excited about trading or borrowing Ether, or the Chainlink token or some random shitcoin that someone made last night at 2 in the morning.”

That isn’t to say they aren’t interested in blockchain technology.

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“They love the idea of DeFi — they love the idea of financial products built in a way that is stronger, more transparent, more efficient, cheaper, better,” Leshner said.

But they want to use it to trade and borrow “their assets”: stocks, bonds, currencies and commodities, and not cryptocurrencies.

Leshner called it the “big divide” that will “define the next 10 years of DeFi.”

Earlier this year Leshner left his position as CEO of Compound Labs, the company responsible for the maintenance of the Compound protocol. He has since started a new company, Superstate, that aims to bring traditional assets onto the blockchain.

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Leshner’s departure was motivated, in part, by this realisation about the divide between institutions and crypto firms, he told the crowd Tuesday.

Leshner did not immediately respond to DL News’ request for comment Tuesday.

Some disagreement

Shawn Douglass, CEO and co-founder of blockchain data provider Amberdata, said he was frustrated by Leshner’s comments.

“I strongly disagree with that,” he told DL News. “What is the difference between ‘their’ assets and ‘our’ assets? I don’t believe in partitioning the world that way.”

Douglass pointed to stablecoins, many of which are backed by US Treasuries, as evidence of how traditional and crypto assets can be combined.

“Every DeFi protocol is denominated in stablecoins,” he said. “Those are tokenized treasuries, therefore there isn’t a ‘them’ versus ‘us’ in my view of the world.”

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Yet Douglass agrees that institutional investors appear to be particularly excited about blockchain technology more generally.

“Moving into that public ledger, where everything is visible and better — I think that’s what the institutions are interested in,” he said.

According to Leshner, the first wave of DeFi protocols have shown institutional investors what is possible with tokenized assets.

“These tools are great as proofs-of-concept about what you can do with a smart contract or distributed tech,” he said on stage.

Kristi Põldsam, co-founder of Cosmos DeFi protocol Sommelier and a former investment banker on Wall Street, agreed.

“You are testing this system with crypto assets before you go into the real-world asset space, maybe where the stakes are even higher,” she told DL News.