The world of traditional finance (tradfi) is at the dawn of a deep transformation, motivated by the incessant innovation of blockchain technology. Although the introduction of Bitcoin ETF marked an important step, it was only the first step. The real convergence, where the vast capital of Tradfi responds to the efficiency and transparency of decentralized finance (DEFI) now takes shape. The crucial question, however, remains: is Tradfi really ready for chain finance?
Beyond the FNB: the next wave of institutional capital
The initial flow of institutional capital in the crypto has been a net, the next will be a flood, and it will not be motivated only by new ETFs. According to Monty Metzger, CEO and founder of LCXThe most important ramp will be the tokenization of active active world (RWAS). “The next wave of institutional capital will not come from new ETFs, but tokenized active assets, bonds, credit, basic products, where the yield responds to compliance,” he said. This feeling is taken up by a fund, which has already exceeded $ 1 billion in management assets (AUM).
This change is not only speculative, it is supported by powerful projections. Markus Levin, co-founder of Xyoquotes a standard approved report predicting that the RWA market could increase to 30 dollars of dollars by 2034. It also mentions a projection of the World Economic Forum that decentralized physical infrastructure networks should reach 3.5 billions of dollars per 2028. This change of paradigm, such as expressions of revocation, such as movement, such as change, as the change, Xyo already leading the charge with more than 10 million knots.
Another critical catalyst for institutional entry is the maturation of stablecoins. With a regulatory clarity emerging from executives such as the EU mica and the invoice of the United States, banks and payment providers gain the necessary confidence to emit and use stables-coats in accordance for settlement and cash operations. This creates a bridge between traditional currency and the world in chain, opening the way to a larger institutional commitment.
Bitget’s operations chief, Vugar Usi ZadeAdd a crucial perspective on this evolution. “While tokenized assets and the stablecoins are the main ramps on ramps, institutions also look for sophisticated and inquesting platforms to manage their new exhibition,” he notes. “We see a growing demand for tailor -made childcare solutions and high performance places that fill the gap between the management of traditional assets and the cryptography market.” This indicates that institutions will not just want to contain these assets; They will need the infrastructure to exchange, lend them and manage them safely and effectively.
Obstacles on the road to public public
Despite clear opportunities, a number of important obstacles still prevent major financial institutions from fully adopting public challenge protocols. Eugen Kuzin, CMO / Member of the Cryptopay Board of DirectorsIndicates three main obstacles: regulatory uncertainty, technical complexity and a deep cultural gap.
The regulations remain the largest obstacle. As Kuzin notes, legal frameworks for DEFI, in particular with regard to KYC (know your customer) and LMA (fight against money laundering), are still in flow. Kevin Lee, Director of Business in Gate The emphasis also underlines, declaring that traditional institutions are linked by strict mandates and be wary of engaging with the anonymous and not audited protocols. The regulated and approved CEXs can become the average soil solution to fill the gap.
The technical challenges are just as intimidating. Public protocols DEFI are not designed to connect and play with inherited banking systems. They require a new infrastructure and expertise on an intelligent contract, which adds a layer of complexity and risk. The concern about the vulnerabilities of intelligent contracts and the error potential of users also persist, because the level of protection infrastructure that Tradfi expects is still in its infancy.
Finally, cultural disconnection is a key factor. Defi’s philosophy without authorization and rapid experimentation is a striking contrast with the hierarchical state of mind and opposed to the risk of tradfi. As Kevin Lee Explains that many executives do not have a deep cultural and technological understanding of decentralization, which leads to reputation concerns and a perceived loss of control. With his previous experience in Bulge Bracket, he thinks that culture change will take time.
Bitget’s Vugar Usi Zade Add a pragmatic view. “This is not only a question of code, it is the user experience,” he says. “Many public challenge protocols are simply not designed for the institutional user. The interfaces are complex, gas costs are unpredictable and the risk of impermanent loss is a concept foreign to most traditional portfolio managers. We believe that a hybrid approach, where centralized exchanges offer a controlled, secure and intuitive gap towards the DEFI products, will be the key to ensuring the brewing of this gap. ”
The most mature primitives for tradfi
While the institutions cautiously explore the world in chain, they climbed to the most mature and familiar challenges of challenge.
Kevin Lee Identify decentralized loans and tokenized asset management and transverse collaterals between traditional asset classes and digital assets like the three sectors most likely to be adopted first.
Protocols like Aave and Compound have demonstrated remarkable resilience and scale. Their upgraded loan models and the introduction of KYC pools (for example, Aave Arc) offer predictable yields and a level of familiarity that institutional treasury bills may include. Pilot programs like the Guardian of the Mas of Singapore project, which used Aave Arc for institutional bond transactions, validate this potential more.
Griffin Ardern, head of research and office options at Blofinalso highlights asset management as a good entry point. He notes that the approval of the credit of institutions can mitigate the risk of compensation in DEFI without authorization. In addition, asset management has lower liquidity and network speed requirements, which means that institutions do not have to bear significant transaction costs.
On the other hand, sectors such as decentralized decentrals, with their risks of inherent lever and their regulatory examination, are considered less suitable for early institutional adoption.
Bitget’s COO, Vugar Usi Zade, concludes that the future will involve a mixture of the two worlds. “We see a pressure for” authorized deffi “, where institutional capital can access the advantages of chain protocols, such as automated execution and transparent regulations, but in a controlled and compliant environment,” he said. “This is where solutions such as intelligent contracts of institutional quality and dedicated DEFI vaults will play a central role, allowing institutions to dive their toes in the water without diving head into the Far West of public protocols.”
Evolution of risk management for a chain future
In order for institutions to be fully in space, risk management and chain compliance executives will need a radical development. The traditional model of relying on intermediaries and human surveillance must be replaced by a system where confidence is integrated into the code itself.
This will require the development of sophisticated identity solutions on the chain and improved analyzes to meet KYC and AML standards. The use of authorized pools and Kyc-in-Gated protocols will become more widespread, allowing institutions to participate in a compliant manner. In addition, the industry will have to build a robust institutional quality infrastructure that simplifies complex processes, such as the management of multi-chain assets and secure the management of keys.
In the end, the great convergence is inevitable. The efficiency, transparency and liquidity that chain financing offers are too convincing to ignore. Although the trip is slow and deliberate, the bases are being set up. The next 12 to 18 months will not only be on more FNB; They will be on the change silent, but monumental, of active active worlds on blockchain, driven by a new generation of institutional quality infrastructure and a progressive, but necessary cultural evolution. The question is no longer if Tradfi will go in a chain, but when it will adapt to this new financial paradigm.
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