Despite years of infrastructure development and regulatory movement, decentralized finance (DeFi) and asset tokenization continue to struggle for mainstream institutional support, according to a new report by JPMorgan.
The bank’s analysts, led by Nikolaos Panigirtzoglou, argue that enthusiasm from retail and crypto-native participants hasn’t translated to traditional finance players. DeFi’s total value locked remains far below its 2021 highs, suggesting slow recovery since the 2022 market crash.
A mix of global regulatory fragmentation, vague legal treatment of on-chain investments, and concerns over smart contract reliability remain key barriers. Even efforts to introduce compliance-focused DeFi tools like permissioned lending pools and KYC-gated systems haven’t shifted the institutional stance much.
While regulators such as the SEC have begun initiatives like “Project Crypto” to modernize oversight, JPMorgan remains skeptical that this alone will overcome long-standing trust and operational concerns.
The situation is similar in tokenization. Despite all the noise, only about $25 billion in assets have been tokenized — a figure mostly driven by crypto-native entities. Tokenized bonds and money market funds, like BlackRock’s BUIDL, have seen limited secondary trading and inconsistent adoption. Private credit tokenization, though growing, remains dominated by a handful of players.
JPMorgan analysts also question whether traditional finance even needs tokenization. With fintech already making significant improvements in transaction speed and efficiency, many investors see little incentive to migrate to blockchain-based systems. Transparency issues also loom large — especially in equity and bond trading, where institutions favor off-exchange “dark pools” to hide trading activity.
The report concludes that while tokenization and DeFi hold theoretical promise, actual demand from institutions is still lacking — not just due to regulatory gaps, but because traditional players simply aren’t convinced of their utility yet.
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Source: https://coindoo.com/jpmorgan-finds-little-institutional-appetite-for-defi/