The panel at Proof of Talk in Paris. (Olivier Acuna/CoinDesk)
What to know:
Industry executives say DeFi’s long-term value lies in overhauling banks’ back-office operations rather than in speculative trading.
Institutional capital will remain sidelined, however, until DeFi addresses persistent security flaws.
Societe Generale said regulated banks can close these gaps with tokenized assets and bank-issued stablecoins, offering the safety and custody that mainstream clients demand.
In April, breaches were reported in 27 out of 30 days, prompting CertiK CEO Ronghui Gu to describe it as DeFi’s worst month in four years. Drift Protocol and Kelp Dao alone were hacked by North Korean cybercriminals in exploits that drained nearly $600 million from the two lenders.
“I don’t think you see a growth in DeFi until we fix the first problem … which is the hacks,” said Maja Vujinovic, CEO of investment and advisory firm OGroup. “I think it’s an absolute problem until we solve the bridges. I don’t think that DeFi grows outside of the DeFi degen community … until they fix probably a whole stack.”
Her comment echoed Ben Nadereski, co-founder and CEO at Solstice, a Solana-based DeFi yield protocol, who told CoinDesk in an interview that DeFi’s growth is being held back by the onslaught of exploits, a flaw he blamed on developers frequently building innovative code while not paying enough attention to the core responsibilities of managing capital.
Working on a fix
Stéphanie Cabossioras, chief strategy and global policy officer of Societe Generale Forge, said traditional banks are already working to fix these structural gaps.
She pointed to the company’s record of tokenizing structured products and green bonds on public blockchains. To make those digital assets work, she said SG-Forge had to fix the cash settlement layer by developing its own regulated stablecoins, such as EURCV and USDCV.
“At the end of the day, we were stuck because there was only the securities leg on the blockchain, and we had no cash leg on the blockchain,” Cabossioras said. “That’s why we started to issue a stablecoin.”
Institutional clients, Cabossioras said, prefer the safety of a regulated bank over open-source, non-custodial DeFi protocols.
“In everyday life, anybody — individual, medium, or large enterprise — we want to have a trusted party,” Cabossioras stated. “We don’t want to keep our assets in our private wallets, in our safes at home. We want to delegate this peace of mind to a third party. And that’s why custodians or banks still have a future.”
Jenny Johnson, Franklin Templeton’s CEO, said blockchain and crypto threaten a huge number of business models that exist today in traditional finance.
What to know:
Franklin Templeton CEO Jenny Johnson said major financial firms are slow to adopt public blockchains because the technology threatens lucrative fee-based business models built on intermediating transactions.
Johnson cited the firm’s tokenized money market fund, Benji, to argue that running transactions on public networks like Stellar is dramatically cheaper than…
