When Will DeFi and TradFi Intersect?

DeFi or Decentralized Finance has been at odds with TradFi for years now. The differences between these two sectors were once considered irreconcilable, however, although today we can see that these two will eventually intersect, when will this occur?

With DeFi becoming more and more popular, many have assumed TradFi will slowly die down as DeFi takes over. However, this doesn’t seem to tell the whole story, with TradFi introducing some of DeFi’s conveniences into their platforms, it only seems like a matter of time before the two meet.

Today, we’ll be going over the main barriers for DeFi and TradFi to intersect, what it will take to overcome these roadblocks, and SOMA Finance, one of the few DeFi apps fast approaching this intersection.

Barriers To Intersection And How To Overcome Them

Regulatory Difficulties

DeFi projects have been facing regulatory difficulties ever since their inception. These issues are intensified when talking about US-based securities. While there are platforms with the necessary credentials to trade US securities, what currently exists is severely limited.

The main ways to overcome these issues are to either lower regulatory requirements for DeFi services, or for DeFi services to work hard to pursue the necessary licenses and compliances to trade US securities.

Trust And Adoption Rate

DeFi platforms are still less trusted worldwide when compared to their TradFi counterparts. This is in part due to DeFi’s novelty, and in part because it can be difficult to trust a decentralized authority over one we’re used to. However, with banks starting to notice DeFi platforms, as well as DeFi showing excellent performance, this issue is slowly being alleviated.

The other issue is adoption rate. For DeFi and TradFi to intersect, they’d have to share a majority of their users. However, DeFi platforms currently have far fewer users than something like the Bank of America. The main way to solve this issue is simply for DeFi to keep putting up good results and for us to keep spreading the word about DeFi applications.

DeFi Platforms Are Harder To Tax

This is another issue that gets intensified in the US. While digital transactions made with cryptocurrencies are taxable, reporting said taxes isn’t easy. With most DeFi applications being built on permissionless and pseudonymous blockchains, it can be quite difficult to report these assets on your tax form. In fact, a study made by Barclays states that the IRS might be missing out on up to $50 billion in unpaid blockchain taxes each year.

Since there are no intermediaries that would enforce taxing in the DeFi world and verify your identity, it can be quite difficult to fill out taxes when trading with crypto. We can resolve this by introducing measures to ensure proper taxes are paid in DeFi applications, and by creating software that can help calculate your crypto tax. Alternatively, DeFi applications might even partner up with TradFi to help them ensure everything is in order.

SOMA Finance- One Of The First Licensed Tokenized Security DEXs

Outside of the issues outlined above, many raise questions of security, and there’s the simple issue of what you can trade on DEXs as opposed to TradFi. There’s no debate that being able to trade companies like Apple or Tesla has more mass appeal than niche cryptocurrencies.

However, we can see an example of a DEX overcoming all of the issues with intersecting with TradFi in SOMA.finance. It is a globally compliant multi-asset DEX and insurance platform where you can trade cryptos, NFTs, ETFs, STOs, and even tokenized equities.

Currently, SOMA.finance is one of the few owners of the SEC & FINRA approved license to offer tokenized securities on the blockchain. Upon its launch, the platform will boast up to 30 of these equities, all the while remaining completely decentralized. As a joint venture between MANTRA DAO and Tritaurian Capital, we can see SOMA.finance as one of the first true intersections of DeFi and TradFi.

Closing Words

Although DeFi and TradFi have been at each other’s throats for a long time, it seems like a time is coming when the two will intersect in an effort to elevate one another.

Although there are still challenges to overcome in accomplishing this, there have been massive efforts made. There’s no better example of this than SOMA.finance, the first SEC & FINRA-approved DEX to trade tokenized securities on a decentralized platform. If this platform, a joint venture between a DeFi and TradFi entity is successful, we might just enter a new age of finance.

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