Decentralized finance (DeFi) is poised to become a core layer of infrastructure for tokenized financial markets as trillions of dollars of assets hit blockchain rails in the coming years, according to analysts at global bank Standard Chartered.
In a research report published Monday, Geoffrey Kendrick, the bank’s global head of digital asset research, estimated that tokenized assets on public blockchains could reach a value of $4 trillion by the end of 2028, split evenly between stablecoins and tokenized real-world assets (RWA), such as bonds and funds.
As these assets move on-chain, they will increasingly rely on DeFi protocols for trading, lending and collateral management rather than traditional financial infrastructure, Kendrick argued.
“DeFi protocols are the infrastructure native to tokenized assets,” the report said.
The report focused on the concept of ‘composability’, a characteristic of blockchain-based markets where assets, exchanges, lending systems and settlement rails operate on the same shared ledger. This allows a tokenized asset to fulfill multiple functions simultaneously: generate returns, support a loan and remain tradable at the same time.
In contrast, traditional finance still relies on separate intermediaries for custody, settlement and collateral management, which often means delays and additional costs, the report said.
Kendrick pointed to BlackRock’s (BLK) tokenized Treasury fund BUIDL, issued by tokenization specialist Securitize (CEPT), as an early example of how tokenized assets are already being integrated into DeFi applications. The fund can simultaneously generate government bond returns, serve as collateral and interact with other credit protocols without the need for separate bilateral integrations.
Kendrick said clearer U.S. regulations could accelerate this shift. The CLARITY Act, advanced last week by the Senate Banking Committee, as a potential catalyst for bringing more institutional assets to market if it is signed into law later this year.
That growth in assets and onchain activity will ultimately translate into higher valuations for DeFi protocol tokens. “More assets moving on-chain will likely mean greater throughput on DeFi protocols, which will support protocol token prices,” Kendrick said.
While crypto exploits, such as the recent Drift and KelpDAO hacks that took a combined nearly $600 million worth of digital assets, have put a dent on DeFi, the report states that larger protocols are becoming more resilient through audits, insurance mechanisms and more professionalized governance structures.
“Existing DeFi protocols appear to be in a strong position to build the institutional ties needed to scale,” Kendrick wrote.