For years, decentralized finance, or “DeFi,” was treated in traditional finance circles as little more than a speculative casino, frivolous and potentially destabilizing. That perception is changing fast. Hedge funds are experimenting with on-chain liquidity pools, major asset managers are piloting blockchain settlement, and digital asset treasury companies (DATs), chasing the wildly successful strategy of Strategy’s Bitcoin balance sheet, are turning to DeFi to generate yield and return value to investors. Wall Street’s interest is no longer hypothetical. Currently, institutional exposure to DeFi is estimated at about $41 billion, but that number is expected to grow: EY estimates that 74% of institutions will engage with DeFi in the next two years.
This reflects a broader macro trend: traditional financial institutions are starting to view DeFi not as a risky frontier, but as programmable infrastructure that could modernize markets. The appeal is twofold. First is yield: native staking rewards, tokenized Treasuries, and on-chain liquidity strategies that can turn idle capital into productive assets, something only possible due to the unique features of the technology itself. Second are efficiency gains: real-time settlement, provable solvency, and automated compliance built directly into code.
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