[Digital Today reporter Chi-gyu Hwang] Asset manager Bitwise Asset Management has made a full-scale entry into the decentralised finance (DeFi) market.

Bitwise launched its first onchain vault strategy based on the Morpho protocol and activated a strategy targeting an annual return of 6 percent in USDC, The Block reported on Jan. 26 (local time).

In an interview with The Block, Jonathan Mann (조너선 만), head of multi-strategy at Bitwise, said it generates returns by deploying capital into Morpho’s overcollateralised lending market. He said the firm plans to diversify the strategy into other stablecoins and crypto assets, tokenised real-world assets (RWA), decentralised exchange liquidity provision and yield farming.

Bitwise is known for its existing ETF products, and it introduced the onchain strategy for investors who find it difficult to directly manage complex onchain risks. Bitwise handles strategy design and real-time risk management, while users’ assets are stored onchain in a non-custodial way. Capital is automatically allocated through smart contracts within predefined risk limits.

Bitwise described the onchain vault strategy as “ETF 2.0” and projected assets under management would double.

Kraken also unveiled its “DeFi Earn” product the same day in collaboration with onchain vault infrastructure firm Veda, presenting returns of up to 8 percent. Coinbase has offered onchain lending using Morpho for more than a year, but it does not act as a strategy curator.

Morpho co-founder Paul Frambot (폴 프람보) said Coinbase focuses only on the user interface and distribution and does not manage the strategy itself. He explained that Bitwise will act as a curator that designs the strategy directly and manages risk.

Onchain vaults provide transparency and automation, but they also carry risks such as smart contract vulnerabilities and potential losses if collateral values plunge, The Block reported. It said that unlike traditional financial products, they lack insurance protections, and losses could be shared among borrowers within the same vault.