Franklin Templeton Supports Bitcoin DeFi: Expanding Practical Opportunities for Investors

Source: CoinDesk, Omkar Godbole

Article Highlights

• The narrative of Bitcoin is expanding from "store of value" to the field of decentralized finance (DeFi).

• Kevin Farrelly of Franklin Templeton believes this is a positive signal.

• The DeFi scenario gives Bitcoin more "investment and utility value," enhancing asset attractiveness.

With the conclusion of the Token2049 summit in Dubai, the positioning of Bitcoin (BTC) is rapidly evolving: from the traditional "digital gold" to an asset with DeFi application potential, beginning to compete in the same arena as Ethereum, Solana, and others.

Institutions, including Franklin Templeton, believe this is a positive trend that will expand more practical uses for Bitcoin without undermining its core appeal as a store of value.

"I don’t believe that Bitcoin DeFi will dilute the core narrative of Bitcoin," said Kevin Farrelly, Managing Director of Blockchain Venture Capital at Franklin Templeton and Vice President of Digital Assets, during his speech at the Bitlayer side event this week. "On the contrary, this development expands Bitcoin's appeal to specific investor groups—those with a certain level of technical ability who can optimize asset allocation based on yield, security, or customized portfolio objectives."

He pointed out: "These users are not trying to overthrow Bitcoin's core positioning as a 'store of value', but rather expanding its functionality based on this. This is not a weakening of the narrative, but an iterative upgrade of the infrastructure."

Franklin Templeton is an investor in Bitlayer. Bitlayer is a Bitcoin Layer 2 network based on the BitVM solution, which introduces features such as smart contracts, DeFi integration, faster transaction processing, and lower fees, all while maintaining the security of the mainnet. These features cannot be natively achieved by the Bitcoin base layer.

The institution's Bitcoin ETF (EZBC) has recorded a net inflow of $260 million since it was listed on January 11, 2024. As of May 1, 2025, the fund holds a total of 5,213 BTC, worth over $500 million at the current coin price.

From Digital Gold to Digital Financial Infrastructure

The original vision of Satoshi Nakamoto for the Bitcoin blockchain was to create a decentralized financial system that achieves financial sovereignty and privacy protection, eliminating reliance on intermediary institutions. However, more than a decade later, the native cryptocurrency of this system—Bitcoin (BTC)—quickly gained the reputation of "digital gold," becoming a reliable means of value storage, and this narrative has continued to play a positive role.

According to CoinDesk data, Bitcoin's market capitalization has surpassed $1.9 trillion, accounting for nearly 60% of the total cryptocurrency market capitalization (approximately $3.12 trillion). It is the most liquid cryptocurrency asset in the market, with a daily trading volume of tens of billions of dollars globally, and has been included in the asset reserves of several publicly listed companies.

In addition, in recent years, various compliant investment tools related to Bitcoin have emerged, allowing participants in traditional financial markets to also access such assets.

For example, according to data from Farside Investors, 11 Bitcoin spot ETFs that have been listed in the United States since January 2024 have attracted nearly $40 billion in funds to date. Meanwhile, the net inflow for Ethereum spot ETFs during the same period has been less than $3 billion.

Institutional investors' strong demand for Bitcoin is widely attributed to its narrative as "digital gold"—compared to platforms like Ethereum or Solana that support complex DeFi applications, BTC's positioning is clearer, its understanding threshold is lower, and therefore it is more easily accepted.

Farrelly stated in an interview with CoinDesk: "The core positioning of Bitcoin is digital value storage. Unlike other more complex crypto projects, Bitcoin doesn't require excessive technical explanation—its goals are clear and its logic straightforward. This clarity may be the reason it is easier to understand, construct investment models, and even allocate through ETFs." He added, "In a crypto market filled with complexity and speculative narratives, Bitcoin itself offers a stable and clear investment direction—one that is increasingly being recognized by the market."

However, because of this, many Bitcoin "minimalists" oppose the direct introduction of DeFi-like functionalities into the Bitcoin main chain, fearing it may undermine its core appeal.

However, at Bitlayer's side event and the main forum Token2049, the popularity of "Bitcoin DeFi" is evident, reflecting the growing demand among BTC holders for on-chain gain opportunities.

Charlie Yechuan Hu, co-founder of Bitlayer, told CoinDesk: "Bitcoin DeFi products with trust-minimized cross-chain bridging mechanisms and sustainable revenue models are increasingly becoming a core need for BTC holders and Bitcoin network maintainers."

He further pointed out, "We are building critical infrastructure through BitVM technology to empower Bitcoin DeFi. Many promising Bitcoin DeFi use cases will significantly enhance the asset value of BTC and strengthen users' motivation to hold and use it."

This wave of Bitcoin DeFi may also benefit miners. Although the Bitcoin block reward halves every four years, the increase in on-chain transaction activity driven by DeFi applications can compensate for the decline in earnings through increased fee revenue, thereby supporting the long-term security and sustainability of the Bitcoin network.

Farrelly emphasized: "The most important point of Bitcoin DeFi is that it introduces new transaction fee revenue—this is crucial for the long-term security and sustainability of the network in the context of continuously decreasing block rewards."

Charlie Yechuan Hu also holds a similar view, pointing out that as network computing power continues to improve, miners increasingly need on-chain activities like Bitcoin DeFi to maintain their income.

He added: We need to build a Bitcoin Rollup system with security verification capabilities so that transaction fees can flow back to the Bitcoin mainnet.