Less than a year later, PayPal launched its own digital currency. Another heavyweight, VISA, had similar plans, but ultimately decided to increasingly use Circle’s USDC. Similarly, some of the largest and best-known institutional firms on Wall Street and beyond have entered decentralised finance – BlackRock, Schroders, Fidelity International, Goldman Sachs and Abrdn are among those who have made significant and strategic moves into cryptocurrencies through investment products, collective offerings, mergers and acquisitions.

This move into DeFi by blue chip institutional companies has shown that digital assets and the technology on which they are built can and are seen by institutional investors and managers as a new asset class (even if they are sold in old-style exchange-traded funds and trust structures). Second, these types of companies see market opportunities to utilise technology and infrastructure either in their offerings or as an investment opportunity to generate returns. In addition, this institutional shift reflects a change in opinion, especially from high-profile individuals such as Larry Fink, CEO of BlackRock.

Underlying these changes are a variety of motivations and objectives. Some are commercial in nature, such as serving customer needs in-house and being rewarded for doing so. For others, it’s about the use of technology, belonging to an asset class and the new Web3 digital economy that has yet to materialise. And for some, it’s about maintaining centralised power, influence and control over the new international financial system.

That power is not necessarily a bad thing. Large institutional investors bring capital, expertise, research and development, structure and professional standards to a DeFi system that, from philosophical conception to practical implementation, has not had it, at a reputational and financial cost. However, traditional financial institutions may also need to proceed with caution, as there may be a reaction on both sides of the aisle against the move from those with something to lose.