The post The key challenges for institutional DeFi adoption appeared on BitcoinEthereumNews.com.

The following is a guest article from Vincent Maliepaard, Marketing Director at IntoTheBlock. As Bitcoin surpassed its all-time high earlier this year, driven by institutional interest, many expected a similar surge in the decentralized finance (DeFi) space. With DeFi surpassing $100 billion in total value locked (TVL), it was the perfect time for institutions to jump on board. However, the anticipated flood of institutional capital into DeFi has been slower than predicted. In this article, we’ll explore the key challenges hindering institutional DeFi adoption. Regulatory Hurdles Regulatory uncertainty is perhaps the most significant roadblock for institutions. In major markets like the U.S. and the EU, the unclear classification of crypto assets—especially stablecoins—complicates compliance. This ambiguity drives up costs and deters institutional involvement. Some jurisdictions, such as Switzerland, Singapore, and the UAE, have embraced clearer regulatory frameworks, which has attracted early movers. However, the lack of global regulatory consistency complicates cross-border capital allocation, making institutions hesitant to enter the DeFi space with confidence. Moreover, regulatory frameworks like Basel III impose stringent capital requirements on financial institutions that hold crypto assets, further disincentivizing direct participation. Many institutions are opting for indirect exposure through subsidiaries or specialized investment vehicles to sidestep these regulatory constraints. However, Trump’s office is expected to prioritize innovation over restrictions, potentially reshaping U.S. DeFi regulations. Clearer guidelines could lower compliance barriers, attract institutional capital, and position the U.S. as a leader in the space. Structural Barriers Beyond Compliance While regulatory issues often dominate the conversation, other structural barriers also prevent institutional DeFi adoption. One prominent issue is the lack of suitable wallet infrastructure. Retail users are well-served by wallets like MetaMask, but institutions require secure and compliant solutions, such as Fireblocks, to ensure proper custody and governance. Additionally, the need for seamless on-and-off ramps between traditional finance and DeFi…

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Filed under: News - @ December 14, 2024 8:09 pm