How Grove wants to make onchain credit a real institutional market

This is an article based on a Talking Tokens podcast interview. To get the full Talking Tokens episode, subscribe to our Newsletter or check it out on Spotify, Apple Podcasts or YouTube.
Grove has about $1.8 billion in total value locked across its institutional credit strategies, which isn’t a small amount for a protocol that launched little over a year ago. But according to its co-founder Kevin Chan, there’s still a ways to go.
Grove operates within the Sky ecosystem, formerly known as MakerDAO, connecting stablecoin capital with institutional credit strategies such as tokenized Treasuries, money-market funds, private credit and AAA-rated collateralized loan obligations (CLOs).
Grove came about after Chan and his cofounders saw a gap between stablecoins and the traditional credit infrastructure they could access.
“Stablecoins have found product-market fit and it's starting to make its way into the traditional world and to the institutional landscape,� Chan said. “But there was really a gap in terms of how a stablecoin can extend and access credit infrastructure. That was sorely underdeveloped in the DeFi ecosystem.�
That gap led Grove to build on top of the Sky ecosystem as an “institutional capital allocator,� Chan said.
When we spoke last month on Talking Tokens, Grove’s TVL was around $3 billion. Chan attributed the rapid growth partly to Grove’s access to Sky’s balance sheet, and its ability to bring new investment opportunities into the ecosystem.
“The Grove Protocol is one of the few protocols that can tap into that liquidity and be an onchain capital allocator,� he said. “Our growth is kind of like a measurement of that.�
The institutional opportunity, however, extends beyond tokenized Treasuries. Grove is focused on both bringing traditional lending to blockchains and developing new forms of credit with stablecoins. Chan says the latter is particularly important as the market matures.
“The credit opportunities today are fairly limited by the trust systems and the settlement rails that we currently have access to,� Chan said. But as those systems become more digitally-native and scalable, “the credit infrastructure, the whole entire capital markets landscape will shift. You'll have much [fewer] intermediaries.�
That transition will take time, though, and building trust remains one of the biggest hurdles to broader adoption. Grove is addressing that by investing in transparency around its data dashboards and governance structure.
“Part of the underlying inputs for the trust equation is transparency and information,� he said.
The next opportunity may also look very different from the tokenized assets that have dominated the market so far. Chan pointed to compute financing and infrastructure supporting the AI buildout as an emerging credit category, alongside SMB financing and new forms of consumer credit.
“The concept of compute financing, and financing infrastructure to support this AI build out — there's a huge financing equation and credit equation for that,� he said.
That may lead to a broader change in the market, given that tokenization began largely with putting existing financial assets onchain. The next phase could involve using onchain infrastructure to create entirely new credit markets and make existing ones more accessible.
For Grove, the opportunity is ultimately around building the infrastructure that connects those two worlds.