a16z says banks reject pure DeFi, back regulated public-chain rails

Institutions want efficiency, not DeFi ideology. They’ll use blockchains for cheaper ops, faster settlement, and collateral gains — only with control and accountability.

They won’t plug into DeFi as-is. They need KYC/AML, asset freezing, and transaction controls. Permissionless access and anonymity get stripped out, rebuilt as institutional programmable finance.

Private chains hit a wall. Hyperledger-style networks failed to attract meaningful assets and liquidity. Meanwhile, USDT, USDC, BUID, and tokenized Treasuries grow on public chains.

Openness isn’t just ideology. Global 24/7 liquidity, protocol composability, and shared collateral are economic features of public networks. You can copy functions, but not migrate public liquidity and network effects into closed systems.

Winners are the “third institutions.” Firms like Circle, Coinbase, Securitize, Aave, Morpho blend public-chain DNA with compliance and security. The future looks less like banks absorbing DeFi, and more like crypto-native firms becoming new financial institutions.

Key takeaway: TradFi may reject DeFi’s philosophy, but it can’t ignore the public rails and liquidity DeFi created.