66% of Wall Street is Already in DeFi | Paradigm’s 2025 Survey with Dan Robinson & Justin Slaughter

DeFi is a concept of something that does not exist in TradFi, which is the idea of permissionless peer to peer engagement and networks.

That is something that there is nothing that's analogous for in analog. TradFi, they see this as more than just a tokenization machine. They seem pretty open to the whole panoply of what DeFi can offer.

Welcome to Banklist. We explore the frontier of internet money and internet finance. And today we're exploring a survey done by the Paradigm Policy Team, which investigated exactly where institutions are on that frontier of internet money and finance. 300 TradFi professionals were polled by Paradigm and asked questions about their engagement level with crypto. Are they just researching or are they actively getting involved? If they are getting involved, how? Tokenization, stable coins, leveraging DeFi infrastructure like DEXs and borrowing and lending apps? Why are they getting involved? To cut costs, settlement times, transparency, what motivates their engagement with crypto? And also, my favorite, what do they think about DeFi? And maybe to tease a punchline, I was surprised by the sheer percentage of TradFi companies that consider DeFi to be critically important to their business in the future. Dan Robinson and Justin Slaughter from Paradigm are with me on the episode today to go through their report slide by slide. So if you're listening to this podcast, you should know that we are sharing these slides visually on Spotify or YouTube on the video. So if you want to get the full effect of a very bullish report, you should go check that out. But also if you're just out and about listening, we explain it pretty well. So it should work just as well that way as well. So let's go ahead and get right into the podcast with Justin and Dan from Bankless Nation. I have the pleasure of being joined today on this episode by Dan Robinson and Justin Slaughter, both from Paradigm. Dan, Justin, welcome back to Bankless.

Great to be here.

Good to be back.

So, you guys released this uh report called that you guys called TradFi Tomorrow, DeFi in the Rise of Extensible Finance. And this is a report, and we haven't done a report episode on Bankless in a while, but I always thoroughly enjoy these. Kind of just giving the sit rep of TradFi's relationship with crypto, their level of interest in it, and what they are doing in our industry. And I think we're gonna go through some of the big takeaways and findings and share some of the charts on the screen throughout this episode. But before we get into the nitty-gritty details, I want to just talk about some of the high-level motivations for why this was created in the year of our lore 2025, and also the methodologies for this document as well. And so I think we all know that TradFi is very hot on crypto now that we are getting pro crypto regulation pushed through Congress slowly but surely. But maybe, maybe Justin, I'll throw this to you. Maybe just set the table for us, set the context for the relationship with TradFi and crypto and what the motivations were for creating this document.

Thanks for that, David. Let me know to the start. So I've got to give this disclaimer. To be clear, any partisan views that I or Dan express are our own today. They're not an official position of the firm. Paradigm has experienced Republicans and Democrats on the team, and we focus on what's best for crypto, not what is best for one party or another. With that out of the way, here's what drove us to do this report. We have seen for the last several years that there's a lot of discussion in TradFi circles, but often behind the scenes about DeFi. And we've consistently seen a lot of people saying, okay, but this is all a very nice toy you've met, especially from DC policymakers. But where is the real interest from the traditional financiers?

Clearly, if you built something great, they would already be here. So the fact that they're not shows you that the

DeFi is not as useful as you think it is. We regard that as just utterly fallacious. So we wanted to go actually to the metal and ask TradFi firms that are interested in DeFi how interested they are, try to understand exactly what is preventing them from onboarding and also get a sense of how far they've actually waded into these waters. So we worked with Allium Labs and we surveyed 300 TradFi professionals. This spanned institutions, it spanned roles, it spanned regions, we did banks, we did buy side. And the verdict was pretty unanimous. There is really a surprisingly high amount of interest in crypto and in DeFi in particular. I think we found two thirds of TradFi firms are actively either experimenting with or researching DeFi as we speak.

Okay, so that was a little bit of the data collected, but there's some nuances with some of the words that I'd like to really parse out here. So, especially in that one line, more than two thirds of TratFi firms are currently looking into DeFi. What constitutes a TradFi firm? What constitutes DeFi? And what constitutes looking into? Because all of these terms I think are pretty squishy. So maybe we could like provide a little bit more color and parameterize each of these terms.

So the way to think about this, and you've got the slide out that kind of explains what we did in terms of distribution. So this is global. You can see on the right, it's not quite majority American. I think if you add in the US and the UK, it gets to, as well as Ireland, it gets to about two-thirds. We had a substantial amount of participants from other markets.

This included asset managers. About a little under a third of the participants in the survey were asset managers. About, I think 20% were retail banks or credit unions. A smaller number were corporate banks. We had I banks. We had payments companies. We also had VCs and private equity, not including ourselves. And then financial market infrastructure. We can take each of those in turn. Asset managers are the classic buy side, things like hedge funds. Retail banks and credit unions, I think, are pretty self explanatory, as are investment banks. That's your classic.

More like a Goldman Sachs. Payments companies, you have companies like PayPal, you have companies that are involved in

as well. Credit card issuers like Visa and MasterCard. Prior Decoman BC, I think, is pretty self-explanatory. That's people who provide basically funding for various financial purchases and financial actions.

Infrastructure, that is classically things that are exchanges. It is things like DTCC. It's the various plumbing that makes up the traditional finance space.

Okay. And then also what constitutes looking into? Because I think that's a pretty easy thing to state from a from an institution that, oh yeah, we're totally looking into that, uh, without that actually being materially serious. Yeah.

And we actually go through, we did add these questions on crypto as well, but let's go right to DeFi. Let's cut right to the heart of the chase.

We found that this is the way we asked this. So

First off, are you engaged at all? And a third said they're not engaged. Then basically a little under a third said they're researching or exploring. This we regarded as not yet engaged in active involvement, not launching or releasing products, but doing analyses, doing strategic planning, possibly to either get involved or maybe to back out. And then you had a whole lot of rifle shot questions about exactly what they are doing. You'd see them. For some of them, it's building and launching actual products.

For some, it is doing pilot programs. Sometimes it's investing because we see this a lot. A lot of companies are that are in TradFi are trying to get involved by investing in crypto firms or in DeFi protocols. This is an entry point in many ways for them because then they could use the things they've invested in. And then there's also a whole host of consortiums.

So that is more or less how we broke it out. You can see it's pretty evenly divided. It's about five to ten percent for each of those things across the board.

And then uh the the big one, of course, is total engaged, which is 66%, which is the the headline for this one graphic. 67 66% of TradFi firms are doing something with DeFi, are totally engaged with DeFi. Now that I think what you're trying to really land with this slide is you gave institutions the opportunity to really say, yeah, you know, we're researching it, yeah, we're exploring. And some of them did, you know, 30% of them did. But the big takeaway here is 66% is like opting to say that they are

doing how they whatever they interpret as total engagement with DeFi, which is a large number of the highest amount of like high touch interaction with with DeFi. When you guys saw this number, what was your big takeaway?

I I I might I might interpret that word total as being the total number that said they're engaged rather than

that they say that they are totally engaged.

That's correct. It's a width, not an intensity.

Okay, 66% are engaged, meaningfully engaged in some sort of capacity. But still, the point still stands where you guys gave them the opportunity to say, like, yeah, we're just researching it. But then the rest of the people that didn't say that they are doing something more than just researching is 66%. Was that a surprising number? Was that high for you guys? What was your your takeaway with 66% are doing meaningful engagement with DeFi?

I would say I think this was a very encouraging top line number. I will say, you know, I when I first got into crypto back in 2016, I actually was working at a permissioned blockchain startup back when that was a very hot thing. It was called chain. And I think

That, you know, back then, if you asked a lot of companies whether they were engaged, I think they would have said they were. But I think if you zoomed in a little on what they were interested in and what they were doing, it was completely separate from what I think anyone in crypto actually was was thinking in about or was interested in. And so I think actually, you know, this top line number is great. But if we look dig a little deeper into it, it's what really I think makes this report very encouraging is that I think the stuff they're engaged in is I think exactly what real, you know, uh crypto native DeFi people would actually expect them would be excited about or would be would things that they would tell them to.

Dan, maybe I'll ask just to kind of lead with a punchline here. You're a researcher, you're a mechanism designer in crypto, you're also an investor, right? And I mean, Paradigm. Paradigm is a venture capital firm. It would behoove Paradigm to be much more informed about where TradFi is placing their chips in the crypto land as to where to inform where Paradigm ought to invest. What were your big takeaways from this report as a whole? Like what got you excited? What what what really got you going about this?

Yeah. So I think one part that I found very encouraging would be if you look at slide 35,

that's about what parts of DeFi.

TradFi people were most interested in.

And when I look at this, you know, the top ones here, like tokenization of assets, stable coins, decentralized exchange, prediction markets, lending and borrowing, interoperability, these are, I think, exactly what I would expect a native,

you know, DeFi nerd like myself. This is what we we would be most excited about. And what we think is is most success currently most successful in crypto. And I think this other stuff, you know, I think what you would have, if you'd asked this question,

You know, eight years ago, I think you would have gotten completely different answers from banks because I think they would have no idea about what was going on in decentralized crypto. And because obviously DeFi wasn't as mature at that point. So I think these are really these are the things that actually have massive market cap and TVL on on Ethereum today, with possibly to the exception of tokenization of assets, because I think

that's an area where actually I think TradFi is ahead of crypto and is and is very interested in, but where you know we've sort of only started to see the growth in that. But I think

uh the interest here is I think very important because that's something that's going to be a huge trend going forward.

I want to take these sections one by one because you guys do break this out into five big sections. The first one we actually already went through more than two-thirds of TradFi firms are currently looking into D5. I'm going to zoom up to uh page 18 and 19 because I want to focus on these things that this uh report really emphasizes, which is what TradFi is seeing in the value of crypto. Uh and you guys emphasize after your learnings, after your reports from TradFi, that faster settlement times, increased transparency, and lower transaction costs were often cited as the most important benefits. And to me, that just screams stable coins. And it screams stable coins so loudly that I think I'm actually, you know, you would be remiss to miss the deafening silence that there is around everything else. And if we go back down to the slide that you just pointed out, Dan, tokenization was at the top. And what are we talking what are we talking about when we're talking about tokenized and tokenization? It's stable coins and then treasuries. And so one concern that I have is there's so much emphasis on stable coins by TradFi that other things that more crypto natives would find interesting, we'll talk about DeFi indexes, is actually kind of being left out and ignored, at least for right now. That was my first initial gut reaction. Maybe you could reflect on that or uh alleve me of my concerns.

Well, first I'd say I think stablecoins is certainly the type of tokenized real world asset that has gotten the most traction to date on chain. But if you look at that slide 35, actually, I think childfike companies are even more excited about tokenization of other assets. And so there, I think they're talking about assets like stocks, bonds, you know, derivatives,

other ways to basically bring bring other real world assets or traditional financial assets on chain. And I think that's partly because you could get some of the same benefits you've gotten for stable coins from those.

And yeah, you know, I I'd say I think stable coins are really uh are incredibly important to traditional finance. But

part of I think what they're really excited about here is what this can do for for other assets. So, you know, if you don't have anything to

to trade those stable coins against, it's of limited value. But if you can actually do a settlement

assets on a uh atomically on chain or across two chains, I don't think you get a lot of benefit from that. So I think they're very excited. And generally, one of the it seems like one of the pro pilot types of pilot projects that these companies are most excited about is issuing other kinds of assets on chain.

I would also note, I was pretty heartened that there's not much drop-off between tokenization of assets and then not just stable coins, but decentralized exchange. You can see here that the highest number was tokenization, it was 131 out of the 300. But then decentralized exchange was only 122. It was only a drop-off of nine. That's pretty good, actually. I think signifies that even for TradFi, they see this as more than just a tokenization machine.

That, you know, overall, I was pretty heartened that I didn't get the same kind of breakdown I thought we would get of where TradFi is very interested in a very narrow number of uses. They seem pretty open to the whole panoply of what DeFi can offer.

I think the optimistic case here that I'm just happy to get on board with is stable coins is just the global foot in the door for the financial system to get comfortable with crypto. And then really the the race is on for tokenized equities, tokenize anything else beyond that. We have meaningful amounts of tokenized gold. You're seeing Coinbase stock trade tokenized on base. And I guess that's that that's the optimistic scenario. Is there any indications or any additional color that either of you could provide about more specific efforts to tokenize things beyond just like dollars and treasuries and put them on chain?

There's a panel going on right now at the SEC as we record this on basically how to trade, you know, securities on-chain. So I think, and we can discuss this later in the report. A big issue at the moment seems to be the regulatory picture and how much you can tokenize additional assets depends upon regulatory clarity. That said, the lesson of this report is there's a lot of desire for a whole host of additional tokenized products. It's just not clear yet how much you can do before that regulatory clarity emerges. That said, you can see on slide 36 and 37, we already have, of course, now bonds and stable coins.

This is a pretty classic on slide thirty seven looking, you know, s it's the beginnings of an S curve.

So I think you can definitely see where there's interest in one thing, it's likely to be additional interest in others.

And it's slide thirty-seven for the listeners out there is just bonds tokenized on chain. And it is a just a great looking chart. The peak of the chart is at 130 million. So the the y axis is not super high, but I think what Justin's alluding to is like, yo, we are in the very beginning stages of of a large amount of bonds being tokenized on chain. And I think we understand this empirically.

I think from a business perspective, and you know we'll talk about also the policy perspective, which I think is very important. But from a business perspective, one of the biggest things to take away from this is the I think a lot of the demand from traditional finance and the interest is they want to issue things on chain. They want to put assets on chain. Um then I think it's it's largely gonna be up to us and the rest of DeFi to figure out what what we can do with them once we have them instead of using them as collateral or being able to trade them more efficiently.

Why is that the primary motivation to get assets on chain? Like what is the selling point for public blockchains to really like what properties of public blockchains are we really being able to take to TradFi that imbues the securities that they already have? Uh and what happens when they put them on public blockchains? Like why is that a selling point?

So I remember back again in 2016 trying to talk to be as a traveling blockchain salesman, um, trying to convince traditional financial institutions to be interested in blockchains. When you would talk to people.

Uh you know, who are a little bit further removed from the plumbing. So, like the front office, I think they would think that this was this was all kind of interesting, but they were like, isn't this just a database? Like, why do I actually need this? And then you would go talk to people working in the back office and working in, you know, reconciliation and various manual processes. And they would all have these horror stories about how insanely inefficient and manual a lot of the traditional financial system plumbing is. And I think that's what we see in this survey is that the a lot of the interest comes from okay, maybe we can avoid the just absurd manual costs of settling, you know, and handling traditional financial instruments so that it becomes much cheaper to actually just turn out new assets and to and to settle them and borrow against them and trade them.

That's really important because one of the major reasons TradFi used technology in general, we learned of this survey, is to increase in efficiency and reduce cost. If you go back to you know beginning of the end of part, I think it's the back very beginning of part one in many ways, slide 11. We asked them why they look at new technologies generically, even beyond DeFi. And number one and number two were investing to improve efficiency and then to reduce manual labor. We keep forgetting that TradFi is Trad.

It is filled with people in analog jobs doing the kind of work you could have seen our parents or grandparents doing in the 80s, 70s, and 60s. And putting aside the normative aspect of employment, that is incredibly slow and incredibly costly. And also, as Dan has taught me over and over again, humans make a bunch more mistakes than smart contracts.

So as a result, this is just both reducing your compliance, increasing your cost, and reducing your speed. This is all the witch's brew that makes it appealing to use technology generically and then DeFi and crypto specifically.

So during my years in crypto since 2017, there has been this like tokenize the world meme that I remember Anthony Pompliano just like tweeting out over and over and over again back in back in the days. Like, we're gonna tokenize the world. Everything's gonna become a token. And that has been chanted so many times in my brain on Twitter. I've chanted the chant, other people have chanted the chant, but it's been like five, six years of this narrative being chanted. And we've had conferences, digital asset summits, you know, we've we've had the the panels, and even to this day, like we are just having some forms of like asset tokenization. Like stablecoin's great, T-Bill's great, but like the good stuff, which is like the equities market, still not showing up at all. And I'm worried about doing that same thing again in this podcast right now. But this also at the same time feels different. It feels different right now. And maybe that's because of the regulatory section of this article, and also what Justin, you're just talking about going on in in DC and with the SEC right now is like, oh no, the the reason why we are doing this article, this this report, this research report right now is because it is actually happening. We are at the cusp of this becoming real. Uh, and so what was a narrative chant of crypto people for other crypto people primarily is actually turning into some of the TradFi institutions following suit and doing the things of using blockchain to tokenize equities and trade them compliantly on-chain using smart contracts. I've heard that so many times. Uh, but it sounds like what you guys are saying with this report is like, yes, the stars are aligning. What institutions are interested in are the same things that what retail crypto traders are also interested in, and things are actually moving forward in that manner. That's that's kind of like my summary analysis. Justin, give me your give me your your takes on that.