March 17, 2025
The financial landscape is witnessing a historic convergence between traditional finance (TradFi) and decentralized finance (DeFi), a trend that is poised to redefine the future of global markets. As institutional interest in cryptocurrencies, particularly Bitcoin, continues to grow, this convergence is not only inevitable but beneficial for both realms. At Binance, we believe this integration will create a virtuous cycle, driving innovation, accessibility, and stability across financial markets.
Nearly all institutions (94%) believe in the long-term value of digital assets and/or blockchain technology, with 50% of respondents expressing interest in investing in tokenized assets, and 42% having increased their allocations to digital assets in 2024. This shift underscores the growing confidence in digital assets as a viable and valuable component of institutional portfolios.
Historically, the cryptocurrency space has been dominated by retail investors. However, recent developments, including regulatory approvals for Bitcoin ETFs, have sparked significant interest from institutional investors. This is a transformative shift as it demonstrates that support for crypto has grown into the institutional space. Institutional capital brings not only substantial financial inflows but also the credibility and infrastructure required for broader market acceptance. For instance, the introduction of Bitcoin ETFs in the US has unlocked new investment opportunities, legitimizing cryptocurrencies as an asset class and catalyzing further institutional participation.
Bitcoin is the first “ground-up” asset class built by the community for the community, which is why we see such strong grassroots enthusiasm each time the crypto industry makes significant strides, such as the DeFi Summer of 2020, NFTs over the last few years, the introduction of Bitcoin Ordinals, and most recently the approval of spot ETFs around the world. The synergy between TradFi and DeFi is evident. On one hand, the energy, innovation, and customer-centric approach of the crypto industry continue to drive significant advancements. On the other, traditional financial institutions bring decades of experience, regulatory knowledge, and robust infrastructure to the table. This mutual exchange is fostering a new financial ecosystem where the boundaries between DeFi and TradFi are increasingly blurred.
A recent example of this is the strategic investment by National Australia Bank (NAB) venture arm in Zodia Custody, a global digital asset custodian backed by banks. Such collaborations signify a turning point where institutions and infrastructure providers are jointly building the mainstream future of digital assets. This partnership highlights how institutional and decentralized finance can work together to enhance the reliability and security of crypto investments.
Crypto needs more infrastructure development to be more accessible, in order to really gain widespread mass adoption. So we are seeing how crypto continues to build upwards momentum to reach institutions, while TradFi is building out institutional-grade crypto infrastructure to serve enterprise and retail customers. Institutional interest drives the development of better infrastructure, which in turn makes crypto more accessible and attractive to a broader audience. As the crypto market matures, it offers more sophisticated and secure options for investment, further attracting traditional finance players. This bilateral exchange between DeFi and TradFi will become a virtuous cycle, until there is no difference between the two for users.
With the energy, innovation, and relentless focus on the customer that the crypto industry embodies - and that has seen it grow from zero penetration to 10% in 2019, and now 15% of the EU population in 2025, showing a remarkable 50% increase in the last 6 years - there is much for the traditional finance sector to gain from embracing its digital asset counterpart. And equally, with the deep experience, heft, and clout of the traditional finance sector, the benefits flow both ways. This is why both industries are seeing talent move in both directions as crypto matures, traditional finance evolves, and both start to converge.
For the convergence of DeFi and TradFi to reach its full potential, ongoing collaboration and mutual understanding are essential. Regulatory clarity is playing a crucial role in facilitating this integration - with comprehensive regulatory frameworks like MiCA - ensuring that both retail and institutional investors alike, as well as crypto industry players can participate in the market with confidence. At Binance, we are committed to driving this convergence by developing innovative products, fostering partnerships, and advocating for sensible regulation. The integration of DeFi and TradFi can not only enhance the stability and accessibility of crypto markets, but also democratize access to investment opportunities. As we move forward, the continued collaboration between these two worlds can help to create a more inclusive and robust financial ecosystem, benefiting all participants.