Franklin Templeton Backs Bitcoin DeFi Push, Citing ‘New Utility’ for Investors

Franklin Templeton, one of the world’s largest asset managers, is betting big on Bitcoin’s evolution beyond its role as a store of value. By investing in DeFi infrastructure and expanding its cryptocurrency ETF offerings, the firm is positioning itself at the forefront of Bitcoin’s next phase of growth. This strategic pivot reflects a growing belief that Bitcoin’s utility can be enhanced without diluting its core narrative as “digital gold.”

Ask Aime: "Is Franklin Templeton's bet on Bitcoin's evolution a sign of growing confidence in its future as a store of value?"

The Franklin Templeton DeFi Playbook

Franklin Templeton’s DeFi strategy centers on Bitlayer, a company developing the Bitcoin Virtual Machine (BitVM). This layer-2 infrastructure enables faster transactions, lower fees, and advanced functionalities like smart contracts—capabilities Bitcoin’s base layer lacks. Bitlayer’s co-founder, Charlie Yechuan Hu, emphasizes that BitVM’s “trust-minimized bridges” and sustainable yield products could make Bitcoin assets more valuable while encouraging long-term holding. Franklin Templeton’s Managing Principal of Blockchain Venture Capital, Kevin Farrelly, argues this expansion doesn’t dilute Bitcoin’s core value but instead “expands utility for technically sophisticated investors seeking yield or custom portfolio solutions.”

Bitcoin ETF Performance: A Store of Value Meets Institutional Demand

Franklin Templeton’s Bitcoin ETF (EZBC) has been a key driver of institutional adoption. As of May 1, 2025:
- $260 million in net inflows since its January 2023 launch.
- 5,213 BTC held, valued at over $500 million at Bitcoin’s then-price of ~$97,000.
- The fund’s success underscores Bitcoin’s dual appeal: its $1.9 trillion market cap (60% of the $3.12 trillion crypto market) as a store of value and its emerging role in DeFi.

DeFi Infrastructure: A Game-Changer for Bitcoin’s Future

Bitcoin’s DeFi ecosystem is growing rapidly, with total value locked (TVL) reaching $5.3 billion by early 2025. Platforms like Babylon’s liquid staking services and Bitlayer’s BRC-20 token standard are enabling yield-generating applications. Farrelly highlights that increased on-chain activity could offset declining block rewards (which halve every four years) by boosting transaction fees—a critical revenue stream for miners.

Regulatory Clarity and Institutional Momentum

Franklin Templeton’s optimism hinges on regulatory progress. Its 2025 report anticipates the U.S. becoming a leader in crypto innovation through:
- A stablecoin regulatory framework enabling banks to issue tokenized assets.
- Approval of non-BTC/ETH ETFs (e.g., Solana or XRP) as futures markets mature.
- Integration of AI-driven DeFi tools, such as decentralized physical infrastructure networks (DePINs), to streamline logistics and IoT applications.

Risks and Challenges

While opportunities abound, risks remain. Underdeveloped technologies, security vulnerabilities, and regulatory uncertainty could hinder adoption. Franklin Templeton acknowledges these challenges but believes infrastructure investments like BitVM and regulated ETFs will mitigate them.

Conclusion: Bitcoin’s Multi-Faceted Future

Franklin Templeton’s DeFi push is a testament to Bitcoin’s evolving utility. By combining its ETF success ($260M inflows, $500M AUM) with strategic bets on infrastructure like BitVM, the firm is capitalizing on a $1.9 trillion asset class poised for further growth. Regulatory tailwinds, institutional demand, and technological advancements position Bitcoin not just as “digital gold,” but as a dynamic platform for decentralized finance.

As Farrelly concludes: “Bitcoin’s simplicity as a store of value and its potential in DeFi are not mutually exclusive—they’re complementary. The future belongs to those who can leverage both.”

For investors, Franklin Templeton’s moves signal a clear path: Bitcoin’s utility is expanding, and the next phase of its journey is just beginning.