Sky Protocol's Decentralized Finance (DeFi) network has officially launched Grove, a new institutional-grade credit protocol, backed by a monumental $1 billion investment into tokenized credit. This initiative is designed to connect onchain protocols with traditional asset managers, marking a significant step in bringing structured credit products fully onchain.
Grove, a credit infrastructure developed within the Sky ecosystem, was announced in a press release on June 25. At launch, the Sky ecosystem allocated the substantial $1 billion sum to Grove for investments in the Janus Henderson Anemoy AAA CLO strategy. This is a fully tokenized fund created in collaboration with Centrifuge, a leading real-world asset (RWA) platform.
Led by the same team managing Janus Henderson's $2.1 billion AAA CLO ETF, this strategy provides the DeFi ecosystem with access to an asset class traditionally confined to off-chain markets. Collateralized Loan Obligations (CLOs) are known for their yield stability and capital preservation characteristics. This deployment is the first time a CLO investment strategy has been fully operational on a blockchain.
What Is Grove Protocol and How Does It Work?
Grove is engineered to function as a capital routing layer. It seamlessly connects onchain protocols with traditional asset managers. Through its infrastructure, crypto-native projects can deploy their idle reserves into diversified, regulated investment vehicles without ever needing to exit the blockchain environment.
The system is non-custodial, allowing for flexible and permissionless capital allocation. This means users retain control of their assets while gaining exposure to traditionally hard-to-access institutional credit products.
A founding group of TradFi and DeFi veterans from prestigious firms like Citigroup, Deloitte, Blocktower Capital, and Hildene Capital collaborated with Grove Labs, a division of Steakhouse Financial, to incubate and develop the protocol.
The Role of Tokenization in Modern Finance
Grove’s launch underscores the rapidly growing appetite for tokenized fixed-income products within DeFi. The market for tokenized U.S. Treasuries has exploded, growing from approximately $500 million to over $7.3 billion since 2023. By providing a more diversified and actively managed product, the JAAA fund continues this powerful trend toward asset tokenization.
Janus Henderson, which previously partnered with Centrifuge to launch a tokenized treasury fund (JTRY), stated that the success of that earlier initiative helped pave the way for this more advanced CLO strategy.
Strategic Importance for the Sky Ecosystem
Grove is backed by the Sky ecosystem as a core part of its broader endgame strategy. This plan aims to reorganize its core protocol into independent, modular units referred to as "Stars" over the coming years. With Grove joining Spark as a new "Star," Sky is intensifying its efforts to incorporate tokenized real-world assets into its DeFi offerings.
The long-term goal for Sky, as noted by its co-founder, is to build an open and decentralized network for global capital. The launch of Grove advances this mission by adding a new layer of asset diversity to the system’s portfolio of real-world assets. As part of its roadmap, Grove will continue to facilitate capital allocations, positioning itself as a key liquidity engine for the entire DeFi space.
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The Future of Institutional Credit Onchain
The entry of major traditional finance players and the tokenization of complex products like CLOs signal a maturing DeFi landscape. It demonstrates a convergence between traditional finance (TradFi) and decentralized finance, where the unique benefits of blockchain—transparency, efficiency, and accessibility—are applied to established financial instruments.
This move is expected to attract further institutional capital into the crypto space, providing much-needed yield-generating opportunities for large treasury reserves held by DAOs and other crypto-native entities.
Frequently Asked Questions
What is the Grove Protocol?
Grove Protocol is a new DeFi credit infrastructure built within the Sky ecosystem. It acts as a bridge, allowing onchain capital to be invested in institutional-grade, tokenized credit products like Collateralized Loan Obligations (CLOs) without leaving the blockchain.
What is a tokenized CLO?
A tokenized CLO is a traditional Collateralized Loan Obligation that has been represented as a digital token on a blockchain. This allows it to be traded, held, and utilized within decentralized finance applications, making it accessible to a wider range of investors.
Why is the $1 billion allocation significant?
The $1 billion allocation from the Sky ecosystem provides massive initial liquidity and credibility to Grove. It demonstrates a strong commitment to bringing institutional credit onchain and allows the protocol to launch at a scale that can immediately impact the DeFi market.
How does Grove benefit the DeFi ecosystem?
Grove provides DeFi protocols and investors with access to stable, yield-generating institutional assets that were previously unavailable onchain. This helps diversify investment options, improves capital efficiency for idle reserves, and brings a new level of sophistication to DeFi.
Is Grove a separate entity from Sky?
Grove is being developed as an independent, modular "Star" within the broader Sky ecosystem. This means it operates with a specific focus but is still connected to and supported by the network's resources and governance.
What does this mean for the future of RWA in crypto?
The successful launch of a complex product like a tokenized CLO is a major milestone for Real World Assets (RWA) in crypto. It indicates that the infrastructure is now capable of handling sophisticated TradFi products, paving the way for more tokenization of various asset classes.