Paradigm DeFi Report: Over Two-Thirds of Traditional Financial Firms Are Monitoring DeFi

Author: Paradigm Policy Team

Translation: TechFlow

We surveyed 300 traditional finance (TradFi) professionals across multiple institutions, roles, and regions. The results were nearly unanimous: the current financial system, operating inefficiently, is hindering economic growth and causing resource waste. The problem is urgent, and the cost of inaction is even higher. Many see decentralized finance (DeFi) as the solution—a way to eliminate redundancies and unlock real value. Our report makes one thing clear: DeFi is not just an alternative; it is the future of traditional finance—and this transformation must begin with policies that support its development.

The full report can be accessed here.

Finding 1: Over two-thirds of traditional financial firms are actively monitoring DeFi

Existing technological infrastructure and systems in traditional finance are labor-intensive and require extensive manual operations. As a result, many TradFi firms are exploring cutting-edge technologies, actively seeking ways to reduce costs, improve risk management, and enhance operational efficiency through innovation. Cryptographic technologies are increasingly becoming part of their strategic planning:

• TradFi firms view DeFi as key to solving operational inefficiencies.

• Nearly 90% of firms are investing in or researching how to leverage the advantages of public blockchains.

Traditional finance is proactively embracing self-disruption, fully aware of the substantial benefits that transitioning to DeFi-driven infrastructure will bring.

Finding 2: DeFi will become an integral component of core traditional finance operations

The data clearly shows that TradFi believes DeFi will eventually play a critical role in its core products and business lines. This perspective stems from a conviction that DeFi can significantly improve the financial system.

From initial skepticism to growing acceptance, TradFi no longer sees DeFi as confined to the crypto space, but rather as an inevitable trend and a major opportunity.

Finding 3: Traditional finance rejects private blockchains as substitutes for public, permissionless blockchains

Last year, our research showed that central banks are gradually abandoning proprietary blockchains in favor of open-source software and public networks. This survey further reveals that most of the TradFi community views public, permissionless blockchains as essential for applications such as smart contracts and asset tokenization.

Therefore, it is crucial to protect these systems and provide strong incentives for the development and maintenance of open, public infrastructure.

Finding 4: Stablecoins, asset tokenization, and decentralized exchanges (DEXs) are top priorities for TradFi

Stablecoins, asset tokenization, and decentralized exchanges are currently the areas of greatest interest to TradFi, aligning with the growing on-chain transaction volumes in these sectors.

These three pillars are necessary to accelerate market development, as they respectively provide: (1) settlement assets; (2) standardized asset representations; and (3) composable protocols for on-chain financial transactions.

In the coming years, we expect continued rapid growth in these areas.

Finding 5: Regulatory environment is the biggest short-term barrier to unlocking DeFi's economic efficiency—policymakers face a generational opportunity to accelerate transformation.

Traditional finance (TradFi) has recognized that the development of decentralized finance (DeFi) is inevitable and represents a significant improvement over many existing financial systems. On this point, TradFi aligns closely with the crypto industry—which has long worked to protect DeFi’s open architecture, ensuring this innovation isn’t stifled before reaching maturity. However, the main obstacle preventing TradFi from fully embracing crypto technology is not inadequate infrastructure or lack of utility, but rather restrictive policies from banks and market regulators. These regulatory barriers prevent traditional financial firms, banks, exchanges, and funds from engaging with DeFi, thereby slowing down integration.

The era of cautious观望 is over. Four years since “DeFi Summer,” we have witnessed a series of global market events and crypto market turbulence—all demonstrating DeFi’s anti-fragility. It is now time for regulators to open the gates between traditional finance and DeFi, allowing traditional institutions to embrace the transformative potential of this revolutionary technology.

Disclaimer This article is for general information purposes only and does not constitute investment advice, nor does it recommend or solicit the purchase or sale of any investment product. It should not be relied upon as a basis for evaluating investment decisions. It should also not be used as accounting, legal, tax, or investment advice. The views expressed herein are those of the authors as of the current date and do not represent the positions of Paradigm or its affiliates, nor necessarily reflect the opinions of Paradigm, its affiliates, or related persons. These views are subject to change at any time without notice.