As the new year unfolds, the focus on decentralised finance (DeFi) is intensifying, particularly with predictions and advancements expected in 2025. The landscape of DeFi is marked by traditional financial institutions (TradFi) increasingly venturing into decentralised protocols, as noted in a recent report from DLNews.
During 2024, traditional asset managers like BlackRock took significant steps towards integrating DeFi, launching its BUIDL fund on Ethereum and subsequently expanding to include five additional blockchains. State Street also made strides by partnering with crypto custody platform Taurus, while Franklin Templeton saw a growing interest in its US Government Money Fund.
Notably, Deutsche Bank announced plans in early December to develop its own Ethereum layer 2 blockchain to navigate regulatory challenges associated with DeFi. These moves suggest a potential shift in the financial landscape, as Paul Frambot, CEO of DeFi lending protocol Morpho, remarked, “traditional institutions are likely to transition onchain faster than expected.” In tandem with this trend, Fatmire Bekiri, head of tokenisation at Sygnum Bank, predicts that more financial players will enter the DeFi space in 2025 to meet the demand for higher-risk onchain offerings.
The regulatory environment surrounding cryptocurrency remains uncertain, particularly in the United States, which has led many institutions to approach DeFi cautiously. However, with expectations of a more pro-crypto regulatory climate under a forthcoming Trump administration, financial entities may be encouraged to explore DeFi options more openly. Colin Butler, head of institutional capital at Polygon, elaborated, “once certain things get accepted as collateral at big places, then I think everybody else gets to do it. And that’s when I think you see the L curve for adoption.”
Additionally, several prominent DeFi protocols are moving towards establishing their own dedicated blockchains. Uniswap, for example, announced plans in October to create its Ethereum layer 2, named Unichain. DeFi lender Aave is contemplating a similar direction, and Sky’s Rune Christensen has expressed interest in developing a dedicated blockchain as well. Daniel Wang, co-founder of Taiko Labs, indicated that this shift towards proprietary blockchains is primarily driven by the desire to reduce malicious transaction practices and alleviate congestion caused by shared network resources.
Moreover, there is a growing anticipation for a convergence between DeFi and fintech applications. Firms are positioned to harness the potential of DeFi to enhance their offerings. Robinhood has initiated crypto transfer services for its European clientele, while neobank Revolut has expanded its crypto exchange services across various markets. The integration of DeFi within fintech platforms could create significant financial opportunities, especially given the superior yields often associated with decentralised protocols.
Thomas Mattimore, CEO of ABC Labs, proclaimed that 2025 could mark the emergence of what he refers to as the "DeFi mullet," where fintech applications simplify and enhance access to DeFi protocols such as Aave or Morpho. This ambition hinges on DeFi's ability to present secure and compliant solutions, with Mattimore asserting that the abstraction of complex processes related to DeFi could enhance user experience and drive broader adoption.
In conclusion, the evolving landscape of DeFi appears set for considerable transformation in the next year, as traditional financial institutions, dedicated blockchain developments, and fintech integrations converge, potentially reshaping financial practices across the globe. Whether this forecast will materialise remains to be seen as the industry prepares for significant developments ahead.
Source: Noah Wire Services