Compound Invests $52 Million in Institutional Credit
Compound DAO has approved a two-year development plan worth $52 million and restructured its management, betting on RWA, institutional credit, compliance access, and a new protocol to revive growth.
Compound's locked assets have fallen from a peak of about $12 billion in September 2021 to about $1.2 billion, a decline of approximately 90%; during the same period, Aave's locked assets were about $14.8 billion, more than ten times the size of Compound.
The new Executive Director Aaron Schnarch previously served as CEO of Coinbase Custody; Christopher Donovan is the COO, formerly COO of NEAR Foundation; Steven Liu is the CPO, who helped Maple Finance grow its assets from $500 million to $5 billion; Leo Eikelman is the CTO, with team members from Anchorage Digital, HSBC, and Broadridge.
Of the $52 million, about $28 million is allocated for operational expenses such as engineering, integration, risk, and marketing, while approximately $24 million is for growth projects like institutional onboarding, market liquidity, and curator expansion. Initially, only $14 million is available, with the remaining $38 million managed by a seven-member funding management committee under a multi-signature custody arrangement, linked to milestones such as engineering team allocation, V3 production-level integration tools, primary curator access, and V4 testnet.
Compound plans to build RWA access, whitelisting, legal entity connections, KYC/AML, risk management, and credit infrastructure for institutional clients. This transformation means the protocol will no longer primarily rely on permissionless retail lending but aims to become the on-chain backend for banks, asset managers, and institutional-level credit.
In terms of market mechanisms, the demand side consists of asset managers, enterprises, and crypto institutions seeking liquidity through tokenized government bonds, stablecoins, on-chain collateral, and institutional credit; the supply side includes institutions, curators, market makers, and custodians looking for on-chain yields, collateral efficiency, and auditable risk exposure. Compound is using its budget to subsidize engineering, liquidity, and institutional customer acquisition, attempting to redirect TVL back into the protocol; Coinbase Custody, Anchorage, and traditional finance backgrounds help reduce institutional entry friction, but Aave, Morpho, and Maple have already occupied niches in liquidity, modular markets, and institutional credit, so Compound must demonstrate capital efficiency through real borrowing demand rather than incentivized funds.
Source: Public Information
ABAB AI Insight
Compound is one of the prototype protocols of DeFi Summer: launched in 2018, it initiated the permissionless lending cycle of "deposit-borrow-mine" with COMP liquidity mining in 2020, pushing on-chain money markets into the mainstream. However, this mechanism also highly bound TVL to token incentives, leverage cycles, and retail risk appetite. After its peak in 2021, as yields declined, competitor product iterations occurred, and market risk appetite shrank, Compound's locked assets fell from about $12 billion to about $1.2 billion, making it difficult for the old model to support a return to the top.
The capital path is shifting from "token subsidies to attract deposits" to "compliance credit to attract balance sheets." The $52 million is not a one-time freely disposable marketing budget: $14 million is being launched first, while the remaining $38 million will be released by a multi-signature committee based on milestones in engineering, integration, curators, and the V4 testnet. Funds will flow into protocol development, risk frameworks, institutional connections, liquidity seeds, and collaboration channels; institutional funds will need to enter through custody, KYC, legal entities, whitelisting, and RWA collateral. What Compound is competing for is the long-term balances of asset managers, corporate treasuries, and institutional borrowers, rather than short-term high APY funds.
A historical analogy is Aave's expansion from early permissionless lending to Aave Arc and institutional deployments, Maple's entry into institutional lending from on-chain credit pools, and Morpho's attraction of capital with customizable lending markets and risk curators. Each controls liquidity depth, credit underwriting, and market modular entry. Compound's choice resembles a traditional bank transformation: no longer just providing standardized lending products, but needing to offer account isolation, collateral, reporting, and liability boundaries that can be accepted by compliance teams, custodians, auditors, and institutional risk controls. It is entering not a blank market, but the most competitive infrastructure layer of institutional DeFi.
Essentially, this is about industry chain reconstruction. Institutional capital on-chain does not directly purchase COMP or place assets into completely permissionless pools, but enters layer by layer through custody, compliance identities, fund vehicles, tokenized assets, risk managers, and specific credit markets. Compound's new team comes from Coinbase Custody, Maple, Anchorage, HSBC, and Broadridge, precisely to occupy these intermediary nodes; however, regulatory and custody capabilities will raise entry barriers and shift value from generic lending protocols to those who can control funding sources, risk access, and asset distribution. The $52 million buys the qualification to re-enter institutional capital flows, not an automatic return of TVL.
ABAB News · Cognitive Laws
Subsidies can create TVL, but credit can retain capital.
For institutions on-chain, compliance is prioritized over yields.
The revival of the protocol relies on balance sheets, not narratives.