How is DeFi eating traditional finance?

DeFi has transformed the financial sector. As a result, traditional financial firms such as major banks and hedge funds are seeking greater exposure to the DeFi space. With central banks around the world beginning to embrace the concept of CDBCs and stablecoins, as a result of tokenization, the principles underlying the DeFi industry are gaining more acceptance amongst traditional firms.

Compared to other use cases, the trade-off of using permissionless blockchain for finance is worthwhile, as financial service providers have always competed on the trust layer instead of the cost layer. By transferring the trust layer from financial intermediaries to software and code on the blockchain, DeFi can provide universal access to financial services.

As DeFi grows in size, and thus economic importance, established institutions are increasingly seeking involvement in an industry which previously had frequently been dismissed as far too risky. More and more banks, pushed by the demands of clients and shareholders, are now exploring how they might engage with DeFi and the crypto markets.

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