In today’s “Crypto for Advisors” newsletter, Jennifer Rosenthal of the DeFi Institute analyzes decentralized finance and interviews investors in the space.
Next, in “Ask an Expert,” Fintech Wrap Up’s Sam Boboev provides insight into the trends he’s seeing with DeFi and AI.
–Sarah Morton
Demystifying DeFi
As we celebrate another anniversary of Bitcoin, it’s worth stopping to reflect on how the cryptocurrency industry is evolving and what it may mean for financial professionals exploring the digital asset class for the first time.
A new national study from the DeFi Education Foundation, conducted by Ipsos on KnowledgePanel and supplemented by in-depth interviews in the Bronx and Queens, New York, shows that approximately 1 in 5 Americans (18%) say they have owned or used cryptocurrencies at some point in their lives. Our research also found that there is a diverse demographic base of Americans who have owned or used cryptocurrencies in the past 12 months, including about a quarter of American millennials (ages 30 to 44); 1 in 5 Americans identify as black, non-Hispanic; 1 in 5 American men; and 1 in 6 Americans have a bachelor’s degree or higher.
In contrast, only 3% of Americans have heard of “decentralized finance” or DeFi, for short.
So, what is DeFi?
Decentralized finance (DeFi) is a software system of financial applications that allows individuals to have complete control over their online financial transactions: individuals make all decisions and maintain control of their digital assets at all times, without intermediaries like credit card companies. This is possible thanks to a technological innovation called “permissionless blockchains”. A blockchain is a decentralized digital ledger that securely records and verifies transactions across a network of computers without a central authority. Many believe that Bitcoin is the first example of a decentralized financial asset. Other DeFi assets include Uniswap, a DeFi exchange for crypto trading, and Aave, a DeFi tool for lending and borrowing digital assets. It can be useful to think of DeFi as a “sector” of the crypto universe.
Most don’t really understand how the internet is coded, but understand that there is an entire online economy that can be invested in (e.g. tech stocks). Likewise, many will not need to understand how DeFi works, but might be interested in exploring the investment tools and applications that come with it.
Interestingly, the Ipsos study shows us that while Americans aren’t particularly familiar with the term “decentralized finance,” they are interested in the potential that DeFi technology and innovations can unlock. For example, more than half of Americans agree that we should “have a way to send people money digitally without any third parties involved.”
Respondents also express deep frustration with the traditional financial system (fewer than half of Americans believe the current financial system meets their needs), and as technology continues to evolve, one can imagine that consumers and investors will seek reliable alternatives in financial services. Relatedly, 42% said they would be likely to try DeFi if the proposed legislation passed and would use it to make purchases, pay bills and save money.
Financial professionals have a unique opportunity to lead their clients to discover and gain exposure to DeFi as an opportune investment theme. With DeFi adoption still in its early stages – as well as the new suite of digital asset ETPs that provide familiar, regulated exposure to DeFi assets – financial professionals who can provide their clients with clarity, credible research, and free resources on crypto and its sectors, like DeFi, will be in a strong position to capture the next generation of investors.
Americans are increasingly curious about the possibilities that emerging technologies and investments can open up, and financial professionals are well-positioned to help their clients build future-ready portfolios. The new “Demystifying DeFi” research provides timely and methodologically sound third-party data that can help make customer conversations more concrete and actionable.
To find out more, you can download the full research report here.
– Jennifer Rosenthal, Director of Communications, DeFi Education Fund
Ask an expert
Q. What key trend will shape the next phase of DeFi growth?
The main driver of the next phase of DeFi is the tokenization of real-world assets (RWA). According to a16z’s State of Crypto 2025, on-chain US Treasury tokenization grew over 700% year-over-year, reaching $1.2 billion in value locked. Institutions are finally entering DeFi – not for speculation, but for yield and efficiency. As stablecoin volumes exceed $9 trillion annually, tokenized assets are becoming the new backbone of collateral. The next frontier is regulated DeFi, where permissioned pools and KYC-enabled protocols merge institutional trust with the liquidity and transparency of DeFi.
Q. How is AI influencing DeFi innovation?
AI is reshaping DeFi by bringing autonomous decision-making to finance. Gartner estimates that by 2030, $30 trillion in purchases will be made or influenced by AI agents. Intelligent agents now rebalance liquidity pools, manage collateral ratios and predict market developments in real time. This convergence of AI and DeFi paves the way for self-optimized financial ecosystems, in which AI agents manage treasuries, execute transactions, and even design new financial products dynamically.
– Sam Boboev, founder, Fintech Wrap Up
Continue reading
- JPMorgan CEO Jamie Dimon now recognizes that cryptocurrencies and stablecoins are “real” and here to stay.
- Mastercard is in talks to acquire crypto payment rail company Zero Hash for an estimated price of $2 billion.
- BlackRock’s Larry Fink says “we don’t talk about it enough. Most countries aren’t ready for what’s coming” regarding tokenization and digitalization of assets and currencies.
