JPMorgan: DeFi and asset tokenization have not yet attracted institutions.

The involvement of traditional financial institutions in decentralized finance (DeFi) and asset tokenization remains very limited, despite years of infrastructure development and recent legal advancements – according to a new report from analysts at JPMorgan.

In a report released on Wednesday, the analysis team led by CEO Nikolaos Panigirtzoglou stated that the total value locked (TVL) in DeFi has not yet recovered to the peak level of 2021, indicating a stagnation or slow recovery trend since the market crash in 2022. The majority of DeFi activity still comes from individual users and crypto-native investors, while traditional financial institutions remain on the sidelines, even though the industry has added more compliance features such as KYC or licensed lending pools.

Three major barriers

According to JPMorgan, there are three main barriers preventing institutional capital from entering this field:

• Lack of synchronization in cross-border legal regulations;
• Not clear legally regarding on-chain investments;
• Lack of mechanisms to ensure the enforceability of smart contracts and the reliability of the protocols.

Therefore, the participation of organizations still focuses on Bitcoin investment products, rather than more complex blockchain applications.

Tokenization is still mainly a "media effect"

Regarding asset tokenization, analysts believe that the current market size – around 25 billion USD – is still "quite modest", primarily driven by native crypto companies and hedge funds.

Even in areas where tokenization can provide clear benefits – such as same-day liquidity with repos or automatic payments for bonds – the level of adoption remains very low. More than 60 tokenized bonds with a total value of around 8 billion USD have been issued, but most have no secondary liquidity, making these efforts "more experimental than actual commerce." Tokenized money market funds like BlackRock's BUIDL have garnered some interest, but recent capital withdrawals indicate that growth momentum is stalling.

In the field of unlisted assets, analysts argue that the overly high expectations for tokenization are "unrealistic." While the total value of $15 billion in tokenized private credit sounds significant, it is primarily concentrated among a few large players, and there is virtually no secondary market.

"In our view, besides the legal and regulatory barriers, the bleak picture of tokenization also reflects the reality that traditional investors have not yet seen the actual demand for the application of this technology."

They emphasize that the traditional financial system – with the support of fintech – is evolving to provide faster payment speeds and lower costs, thereby reducing the necessity of blockchain in some cases.

Concerns about transparency and trading strategy

Another noteworthy point is that many institutional investors are still hesitant to put stock or bond trading on-chain due to concerns about transparency. In contrast to blockchain – where every activity can be tracked and trading strategies can be exposed – traditional "dark pool" platforms help them avoid being monitored or front-run. This also explains why the rate of off-exchange trading in the U.S. stock market is increasingly rising.

Tokenized deposit transactions are not convincing yet.

Tokenized bank deposits have not yet seen any breakthroughs. JPMorgan observes that there are currently no signs that banks or customers are moving towards using blockchain infrastructure for storing or transacting deposits. The current traditional system is already fast and convenient enough to handle electronic payments between financial assets and deposits without the need for blockchain.

Tokenization of private assets is still a long way off.

For private assets such as shares or private credit – which are often held until maturity and rarely updated for daily pricing – traditional investors may not find interest in an on-chain market that offers transparency and continuous trading.

"For long-term investments, where value is maintained steadily over time and high liquidity is not required, tokenization may not provide any clear benefits."

JPMorgan still leads in blockchain application

Nevertheless, JPMorgan itself is one of the pioneering American banks in the field of blockchain. Their blockchain unit – Kinexys (, formerly known as Onyx) – currently includes four main areas:

Thạch Sanh