Translated by: Plain Blockchain

The current financial system is hindered by inefficiency, which not only suppresses economic growth but also wastes significant resources. The risks are high, and the cost of inaction is even higher. Many view decentralized finance (DeFi) as a transformative solution—a way to cut redundancy and unleash true value. DeFi is not just an alternative, but the future that traditional finance is about to embrace. And all of this begins with policies that support its flourishing.

01
Over Two-Thirds of Traditional Financial Companies Are Focusing on DeFi

The technological infrastructure and systems currently used by traditional finance are labor-intensive and require extensive human intervention. Therefore, traditional financial companies have been exploring cutting-edge technologies. They are actively seeking ways to leverage technology to reduce costs, improve risk management, and streamline operational efficiency. Cryptocurrencies are increasingly being integrated into their strategies:

1. Traditional financial companies view DeFi as a solution to operational efficiency issues.

2. Nearly nine out of ten companies are actively investing or researching how to leverage the benefits of public blockchains.

3. Traditional finance is embracing its own disruption, as it clearly understands the gains from transitioning to a DeFi-driven infrastructure.

02
DeFi Becoming Crucial to Most Core Businesses is Inevitable

Traditional finance explicitly acknowledges that DeFi will ultimately be crucial to its core products and business lines. This stems from traditional finance's belief that DeFi will bring actual improvements to the financial system.

We have come a long way from the era when skeptics believed DeFi would never have relevance beyond cryptocurrencies. Now, traditional finance sees DeFi not just as inevitable, but as an opportunity.

03
Traditional Finance Denies Equal Value of Private Blockchains to Public Permissionless Blockchains

Earlier last year, research showed that central banks are abandoning proprietary blockchains and increasingly turning to open-source software and public networks. Now, most traditional finance communities believe public permissionless blockchains are crucial for leveraging advantages such as smart contracts and tokenization.

Protecting such systems is critical, and strong incentives are needed to develop and maintain open public infrastructure.

04
Traditional Finance's Interest in Stablecoins, Tokenized Assets, and Decentralized Exchanges (DEX)

Traditional finance's greatest interest is in stablecoins, tokenized assets, and decentralized exchanges (DEX), which correlates with the increasing on-chain transaction volumes in these areas.

These three "pillars" are necessary conditions for accelerating market development, as they now have settlement assets, a universal way of representing other assets, and composable, scalable protocols for executing financial transactions on-chain.

In the coming years, these charts are expected to continue trending upward and to the right.

05
The Largest Obstacle Preventing DeFi from Releasing True Economic Efficiency in the Short Term is the Regulatory Environment

Policymakers have a once-in-a-lifetime opportunity to accelerate development. Traditional finance understands that DeFi is inevitable and represents an improvement over most current systems. On this point, they align with the fundamental view of many cryptocurrency practitioners who have been working to protect DeFi's open systems from being stifled before fully maturing. The main barrier to traditional finance embracing cryptocurrencies is not the need for more robust infrastructure or lack of utility, but that many banks and market regulators are preventing traditional financial companies, banks, exchanges, and funds from engaging with DeFi.

The patient period of waiting is over. Four years have passed since the DeFi summer, and global and cryptocurrency markets have experienced a series of events demonstrating DeFi's anti-fragility. It is now time for regulators to begin opening the gates that separate traditional finance from DeFi, allowing traditional financial companies to embrace this innovative technology.

Article Link: https://www.hellobtc.com/kp/du/03/5723.html

Source: https://www.paradigm.xyz/2025/03/tradfi-tomorrow-defi-and-the-rise-of-extensible-finance