Geopolitics and Rates Drive Demand for Risk-Managed Lending
This post is part of Galaxy Lending’s Monthly Market Commentary, offering insights into trends shaping the crypto credit and lending landscape. Subscribe to receive this commentary and more directly to your inbox.
In this report:
DeFi Lending Strengthens: Record TVLs, Low Rates, and Sky Protocol’s Grove $1 Billion CLO Revolution
On-Chain Credit Takes Shape: Moody’s Rated Bonds and PASS Bureau Usher in Next-Gen DeFi Underwriting
MiCA, FCA, and the Changing Regulatory Environment for Crypto Exchanges and Investors
Robinhood Expands into Tokenized Stocks, Crypto Rewards, and the Future of 24/7 Digital Investing
Market Update
June markets were marked by geopolitical shocks and rate stability, driving a flight to risk-managed lending strategies over directional exposure. Bitcoin traded within a relatively narrow range for much of June, with notable volatility mid-month. On June 10, BTC surged past the $110k mark for the first time in nearly two weeks, driven by renewed optimism around U.S.-China trade talks that signaled a potential easing of global tensions. However, markets quickly turned cautious following Israeli airstrikes near Tehran and Tabriz on June 21, which sent BTC down to $103.2k in a sharp but short-lived drawdown. Throughout the month, BTC 3-month annualized basis compressed from over 8% to ~4–5%, pointing to a reduction in leveraged directional positioning. Borrow rates remained low and stable, reflecting muted short demand and a subdued arbitrage environment as basis trades lost attractiveness.
Altcoins outperformed in June, with capital rotating into L1 ecosystems like SOL and AVAX, as well as RWA and DePIN-related tokens that benefited from ecosystem developments and renewed retail activity. While BTC reclaimed the $110k level again at month-end, the move appeared technically driven rather than tied to any specific macro catalyst. On the policy front, the June FOMC held no surprises—rates remained at 4.25–4.50% and guidance stayed data-dependent. Meanwhile, the passage of the bipartisan Genius Act marked a significant moment for U.S. blockchain and AI policy, fueling optimism around longer-term institutional and regulatory alignment.
Key Trends:
001
DeFi Lending Strengthens: Record TVLs, Low Rates, and Sky Protocol’s Grove $1 Billion CLO Revolution
June saw DeFi lending soar past its previous highs, with aggregate TVL in lending protocols clearing $54.4 billion at the end of June. According to DeFi Llama, Maple Finance alone ballooned 554% year to date reaching a high of $1.6 billion as of June 30th. Similarly, other lending protocols like Morpho and Euler also reached all time high TVLs in June, reaching $4.2 billion and $1.1 billion respectively. This collective surge reflects the growing institutional and retail appetite for on-chain lending.
At the same time an influx of capital into the lending markets has driven down the cost of borrowing. From the start of the year the borrow rate of stablecoins has fallen dramatically, notably USDT. On AaveV3 the borrow rate of USDT has fallen to 2.3%, a stark contrast to the double-digit rates seen at the start of the year. Similarly, on CompoundV2 borrow costs have fallen to ~5%, a large discount compared to the start of the year. Lower rates have begun attracting traditional institutions, even as yield-seeking crypto natives adjust to compressed spreads.
Complementing this trend, Sky Protocol’s Grove launched on June 25, with a $1 billion initial allocation into tokenized CLO strategies. Grove is an institutional grade credit infrastructure often described as a “liquidity engine”. Its core mission is to bridge on-chain protocols with traditional finance by enabling capital routing between crypto-native projects and regulated asset managers.
002
On-Chain Credit Takes Shape: Moody’s Rated Bonds and PASS Bureau Usher in Next-Gen DeFi Underwriting
In mid-June, Moody’s partnered with tokenization firm Alphaledger to pilot a tokenized U.S. municipal bond on Solana. The project marked a first: Moody’s credit rating was embedded directly into the token’s on-chain metadata via API, making it publicly readable and smart contract-accessible. This removes the need for off-chain feeds or paywalled access, allowing lending protocols to dynamically adjust interest rates or collateral requirements based on real-time, on-chain credit grades. It’s a milestone in merging TradFi’s institutional-grade risk assessments with DeFi’s transparency and automation.
Also in June, PASS launched as the first blockchain-native credit bureau. Developed by Keeta (a Layer-1) and SOLO (a financial credentialing platform), PASS issues verifiable, tokenized credentials that consolidate fragmented financial data—KYC, KYB, income, and asset records—into a single on-chain certificate. Smart contracts can reference these credentials to underwrite undercollateralized loans, including mortgages and SMB credit, without compromising personal data privacy. Together, these developments signal growing momentum toward credible, automated credit infrastructure for on-chain lending.
003
MiCA, FCA, and the Changing Regulatory Environment for Crypto Exchanges and Investors
Major U.S. crypto exchanges are reportedly close to securing licenses in the EU, reflecting a broader push to comply with MiCA—a new regulatory framework that standardizes crypto rules across member states. MiCA aims to address central bank concerns and create a unified legal environment, prompting platforms to position themselves early for legal and competitive access across Europe. Notably, MiCA introduces requirements for firms to clearly disclose to retail clients whether their assets will be rehypothecated or held in custody, and mandates explicit client consent prior to engaging in such activities.
In the UK, the FCA plans to lift its ban on crypto exchange-traded notes (ETNs) for professional investors, part of its broader efforts to modernize digital asset regulation. However, the ban on retail crypto derivatives remains in place. Meanwhile, Barclays has blocked crypto purchases using Barclaycard credit cards, citing volatility risks and a need to protect consumers from debt not covered by traditional financial safeguards.
004
Robinhood Expands into Tokenized Stocks, Crypto Rewards, and the Future of 24/7 Digital Investing
Robinhood is extending its crypto initiatives by launching tokenized versions of U.S.-listed stocks and ETFs for EU users. These assets are initially issued on Arbitrum, an Ethereum layer-2 network, with plans to transition them to Robinhood’s upcoming blockchain based on Arbitrum's technology stack. The broader strategy is to evolve Robinhood’s EU crypto app into a comprehensive investment platform that supports 24/7 trading, self-custody, and cross-chain bridging of tokenized assets. As part of this expansion, Robinhood reintroduced crypto staking for Ethereum and Solana. Additionally, Robinhood will integrate crypto rewards into its U.S. credit card product later this fall, enabling users to automatically reinvest cashback into digital assets. Robinhood is entering the growing tokenized asset space as platforms race to offer unified trading across asset classes. The tokenized asset market could reach $18.9 trillion by 2033, according to Ripple and BCG.
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