TradFi will keep its distance until DeFi becomes a manageable risk
Traditional finance (TradFi) institutions are increasingly interested in cryptocurrency and decentralized finance (DeFi), driven by a desire for growth and adoption. DeFi offers an affordable alternative to the traditional banking system, especially after recent bankruptcies eroded trust in banks. However, TradFi plays a crucial role in ensuring financial safety through regulations. The integration of DeFi with TradFi requires strategic partnerships and compliance with legal frameworks. Institutions face challenges due to the decentralized nature of blockchain, unclear regulations, and privacy concerns. Despite some progress in compliance, DeFi must enhance its regulatory measures to attract TradFi participation. Prominent asset managers are exploring tokenization, indicating a strong interest in DeFi. For meaningful collaboration, DeFi must adopt innovative compliance tools and embrace regulations, ensuring it maintains its core principles while bridging the gap with TradFi.
