DeFi's Role in Transforming Traditional Finance: A Paradigm Shift

According to PANews, a recent survey conducted among 300 traditional finance (TradFi) professionals across various institutions, positions, and regions reveals a consensus that the current financial system's inefficiencies hinder economic growth and lead to resource wastage. The survey highlights decentralized finance (DeFi) as a potential solution to these challenges, emphasizing its role in reducing redundancy and unlocking real value. The report suggests that DeFi is not merely an alternative but the future direction for traditional finance, contingent on supportive policy development. The survey's findings indicate that over two-thirds of traditional financial companies are actively exploring DeFi. The existing technological infrastructure in TradFi is labor-intensive and requires significant manual operations, prompting many companies to seek advanced technologies to reduce costs, improve risk management, and enhance operational efficiency. Nearly 90% of these companies are investing in or researching the benefits of public blockchain technology, viewing DeFi as a key to solving operational efficiency issues. Data from the survey also shows that TradFi sees DeFi as an integral part of its core business operations. This perspective stems from a belief in DeFi's potential to improve the financial system. TradFi's view of DeFi has evolved from skepticism to acceptance, recognizing it as an inevitable trend and a significant opportunity. Furthermore, the survey reveals that traditional finance rejects private blockchains as alternatives to public, permissionless blockchains. Previous research indicated that central banks are moving away from proprietary blockchains in favor of open-source software and public networks. The current survey reinforces that the TradFi community views public blockchains as crucial for technologies like smart contracts and asset tokenization. Stablecoins, asset tokenization, and decentralized exchanges (DEXs) are identified as key areas of interest for TradFi, aligning with the growing trend of on-chain transaction volumes in these sectors. These three pillars are essential for accelerating market development by providing settlement assets, universal asset representation, and composable protocols for on-chain financial transactions. Growth in these areas is expected to continue in the coming years. However, the regulatory environment poses the greatest obstacle to DeFi's short-term economic efficiency. Policymakers face a generational opportunity to accelerate change. TradFi acknowledges DeFi's inevitable development and its significant improvements over many existing financial systems. The main barrier to TradFi's full embrace of crypto technology is not infrastructure or practicality but regulatory restrictions. These restrictions have delayed the integration of DeFi into traditional finance. As the cautious observation period ends, it is time for regulators to remove barriers between TradFi and DeFi, allowing traditional financial institutions to embrace this revolutionary technology.