Decentralised finance will be the key to reviving today’s inefficient financial system, according to a research-driven crypto investment firm’s latest findings.
The report, TradFi Tomorrow: DeFi and the Rise of Extensible Finance by Paradigm, highlights the overarching belief that DeFi is the future of finance – and that TradFi institutions are open to embracing it.
More than two-thirds of TradFi firms are currently looking at DeFi, while increasingly, crypto (75%), blockchain and Distributed Ledger Technology (DLT) (86%) are becoming embedded in firms’ strategies.
The considerably high percentages of interaction represent the unanimous belief among TradFi firms that DeFi will inevitably be critically important to most core businesses.
Key organisations that have recently made public announcements about their involvement with DeFi include BlackRock, Franklin Templeton Investments and Visa.
Amongst the 66% of respondents confirming their engagement, the most popularly perceived benefits were faster settlement times, greater transaction transparency, and lower per transaction costs.
Regulatory uncertainty is the number one headwind preventing DeFi from unlocking real economic efficiencies in the short term, providing a generational opportunity for policy makers.
Respondents believe that traditional firms would be even more involved with DeFi, if not for regulatory uncertainty, which 52% cited as a factor holding them back.
Issues alongside regulatory ambiguity as a restraining concern included perceived risks, concerns about transparency, and lack of institutional-grade infrastructure.
Paradigm said that if policymakers are serious about reducing inefficiency in the financial system, it is imperative that they adopt policies that allow firms to build on open, public infrastructure.
