The growth of the decentralized finances (Defi) and assets -tokenization remains under the neighborhood, JPMorgan’s Nikolaos Panigirtzoglou said on Wednesday in a research report, referring to the stagnant recovery since the Crypto Winter of 2022.
Total value locked (TVL) in Defi remains highlights under 2021, where most activity is still powered by crypto-native and retail users, noted the report.
Institutional adoption has been left despite the development of compliance-ready infrastructure, such as permitted loan pools and safes with KYC, Panigirtzoglou wrote.
Large barriers remain. Institutions are confronted with legal fragmentation, legal uncertainty about chain activa and concerns about smart contract protection, the analysts wrote. As a result, most institutional crypto activity remains concentrated in Bitcoin
.
Tokenization also has difficulty delivering. Although the sector has seen some grip, with $ 25 billion in tokenized assets, $ 8 billion in tokenized bonds and growing acceptance in money market funds, most initiatives remain small, illiquid or experimental, the bank said. Prominent efforts such as BlackRock’s Buidl and Broadridge’s distributed ledger repepo (DLR) platform offer efficiency gains, but miss a scale.
Panigirtzoglou noted that tokenization in private markets is heavily concentrated with a few players and has no useful secondary market activity.
Many traditional investors remain skeptical, especially given the transparency of blockchain, a disadvantage for institutions that favor provisional trading locations such as Dark Polish, according to the report. The continuous rise of off-Exchange stock trade illustrates this preference.
Despite regulatory initiatives such as the “Project Crypto” of the SEC, Panigirtzoglou doubts whether rule changes can only overcome the deeper issue: traditional finances do not see a clear need for blockchain.
Fintech already has an improved speed and efficiency within the current system, which reduces the urgency to use tokenized alternatives, the report added.
Read more: Sec Chief Paul Atkin’s project Crypto flies under Radar in the middle of market sales: Bernstein
