Several asset management and banking executives stated that for decentralized finance (DeFi) to penetrate the broader mainstream financial system, the key lies not in providing new investment venues, but in improving the efficiency of banks' back-office operations, settlement, and asset processing. However, given the recurring on-chain security issues, institutional adoption remains limited.
A series of security incidents occurred in April.
These statements came from the Proof of Talk conference in Paris. Attendees stated that traditional financial institutions are not averse to blockchain, particularly interested in backend applications, but the current infrastructure security is insufficient to support large-scale adoption.
The most problematic area is cross-chain bridges. Several executives believe that the frequent vulnerabilities exposed in these systems have eroded institutional trust in on-chain transactions and kept more traditional funds remaining off-chain.
- CertiK stated that security incidents occurred on 27 out of 30 days in April.
- The organization's CEO called it the worst month for DeFi in four years.
- Drift Protocol and Kelp DAO were attacked, resulting in losses of nearly $600 million.
Maja Vujinovic, CEO of investment and consulting firm OGroup, stated that DeFi will struggle to achieve its next phase of growth until the hacking issues are resolved. She believes that cross-chain bridges remain the most obvious weakness, and without improvements to the overall infrastructure, DeFi will find it difficult to expand beyond its current niche user base.
Development speed outpaces risk control construction
Ben Nadereski, co-founder and CEO of Solstice, the Solana ecosystem revenue protocol, also told CoinDesk that the frequent attacks are slowing down the expansion of DeFi. He believes that some developers are focusing more on innovative code and new features, but not enough on basic responsibilities such as fund management.
The bank attempted to supplement the cash settlement.
SG-Forge, the digital asset arm of Société Générale, stated that regulated banks are attempting to address these structural gaps. The company mentioned that it is already advancing the tokenization of structured products and green bonds on public blockchains.
Stéphanie Cabossioras, Chief Strategy and Global Policy Officer at SG-Forge, stated that in the early stages of developing the business, the on-chain infrastructure only had the securities asset side, lacking a corresponding cash settlement side, which made the product difficult to truly function. Therefore, the company began issuing regulated stablecoins, including EURCV and USDCV.
- SG-Forge has launched EURCV and USDCV.
- Stablecoins are used to supplement on-chain cash settlement processes.
- The relevant products are mainly targeted at regulated financial scenarios.
Institutions place more emphasis on custody arrangements
Cabossioras stated that institutional clients tend to prefer regulated banks over fully open, non-custodial DeFi protocols. Mainstream clients place greater emphasis on asset security, custody arrangements, and responsible parties, which is why banks and custodians still have room to grow.
This discussion reveals that traditional finance is not rejecting blockchain, but rather lacks sufficient confidence in the security of existing DeFi infrastructure. If issues related to cross-chain bridges, protocol code, and custody cannot be resolved, institutional funds may continue to adopt a wait-and-see approach in the short term.
