South Korean markets tend to prefer XRP over larger assets such as bitcoin and ether, and a volume bump tends to precede price anomalies on local exchanges.

In Brief:

• What’s next for DeFi in 2025?
• We reveal the trends we will look closely at next year.

Happy New Year from everyone here at DL News!

Last year I made some bold predictions for 2024: That permissioned DeFi would roar into life, and that modularity-focused projects EigenLayer and Celestia would redefine the DeFi landscape.

EigenLayer, despite drawing in billions in deposits, hasn’t seen much adoption of its validation services yet. Celestia, too, has been hampered by a lack of demand for its services.

Development for hooks and Uniswap v4, which will make permissioned DeFi a reality, is still ongoing, but 2024 was certainly not a breakout year.

As 2024 draws to a close, join me as I take another stab at predicting the key DeFi trends for the coming year.

TradFi dives into DeFi

This year, several Wall Street firms continued dipping their toes into DeFi.

Asset manager BlackRock launched its BUIDL fund on Ethereum in March, then expanded it to five other blockchains in November.

Rival State Street inked a partnership with crypto custody and tokenisation platform Taurus, while interest in Franklin Templeton’s US Government Money Fund steadily grew.

Over in Europe, Deutsche Bank announced earlier in December that it’s building its own Ethereum layer 2 to address the regulatory challenges of using DeFi.

But these moves may only be the start of a larger push from institutions to utilise DeFi.

In 2025, “traditional institutions are likely to transition onchain faster than expected,” Paul Frambot, CEO and co-founder of DeFi lending protocol Morpho, told DL News.

Fatmire Bekiri, head of tokenisation at Sygnum Bank, said she expects more traditional financial players to enter DeFi in 2025, fulfilling investor demand for riskier onchain products.

Unclear crypto regulations — particularly in the US — meant many financial institutions held off on experimenting with DeFi, lest they fall foul of securities laws.

But with a pro-crypto Trump administration just around the corner, that could soon change.

“People are still trying to figure out what’s compliant,” Colin Butler, Polygon’s head of institutional capital, previously told DL News.

 

“Once certain things get accepted as collateral at big places, then I think everybody else gets to do it. And that’s when I think you see the L curve for adoption.”

Protocols move to their own blockchains

This year, we saw big DeFi protocols move towards launching their own blockchains, usually in the form of Ethereum layer 2s.

Leading decentralised exchange Uniswap announced in October its developing its own layer 2 called Unichain.

DeFi lender Aave is mulling its own Aave Network as part of its v4 upgrade, and Sky founder Rune Christensen has also suggested building a dedicated blockchain.

There are good reasons for them to do so. Layer 2s are a great source of revenue as those running them can skim off the difference in cost between what they charge users and pay the Ethereum mainnet to finalise transactions.

Having a dedicated blockchain for a DeFi protocol means projects can stop malicious forms of MEV impacting their users, and that they don’t have to share resources and bandwidth with other DeFi protocols, potentially preventing congestion.

Daniel Wang, co-founder of Taiko Labs, the firm behind layer 2 blockchain Taiko, told DL News that he sees more fragmentation within Ethereum and the projects building on it in 2025.

But, Wang said, the increased fragmentation will also place a greater focus on interoperability between the growing number of layer 2 blockchains.

DeFi and fintech unite

My final prediction is that 2025 will be the year fintech apps finally start bringing DeFi to the masses.

We’re already seeing signs some firms are preparing. Robinhood rolled out crypto transfer services to its European customers in October, and neobank Revolut expanded its crypto exchange to 30 markets in the region a month later.

Integrating DeFi could be incredibly lucrative for the first fintech company to do so. Yields far exceed those in traditional finance, but they’ve always been viewed as too risky and difficult for many established players to take advantage of.

That impression could be changing — at least towards DeFi protocols with strong security and compliance records.

“In 2025, we’ll see the long-awaited adoption of the ‘DeFi mullet’ — where fintech apps integrate DeFi protocols like Aave or Morpho directly for safer and better financial products,” Thomas Mattimore, CEO of ABC Labs, the team behind Reserve Protocol, told DL News.

The “DeFi mullet” refers to the idea that fintech apps will abstract away the complexity and poor user experience of current DeFi protocols, and open access to their users.

Mattimore’s not alone.

Morpho’s Frambot also predicts that in 2025, access to and adoption of DeFi will be propelled by partnerships with fintech companies.

Like with institutions, the more favourable regulatory environment under the Trump administration should give fintechs the confidence to integrate DeFi.

The bigger question is whether DeFi protocols are ready for a large potential influx of investors from fintech apps. Only time will tell.

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Finance is increasingly a weapon of war. United States policymakers and our allies focus too narrowly on macroeconomic tools like sanctions and promoting the dollar as a reserve currency when the modern front is evolving. Today, the real battles are being waged on smartphones and in the global currency markets.

China is waging a multi-decade plan to displace the United States' greatest asset: the dollar. The dollar is critical to the United States' economic and geopolitical power as the global reserve currency. Without it, our influence would weaken, and our debt would become a bigger problem. This is precisely what the Chinese Communist Party and the Kremlin want.

China and Russia have shed billions of dollars worth of U.S. Treasury holdings while growing their stockpiles of gold. Our sanctions, designed to separate countries from the "Western" economic system, are no longer enough of a deterrent for those who can control financial activity within their borders and project their power outward.

Authoritarian adversaries — including China, Iran and Russia — are actively building parallel cross-border economic systems that will pull into their orbits not only neighboring countries but also our allies who trade heavily with them.

For example, over half of businesses in Japan accept Alipay, while more than one-third accept WeChat Pay. This distribution gives two Chinese firms unprecedented visibility into the individual market transactions of Japanese consumers and businesses. It could allow China to disrupt Japan’s economy should tensions escalate, such as in a potential conflict over Taiwan.

How the U.S. can respond

China sees financial technology and cryptocurrency as tools to extend its financial power and surveillance globally. The United States must respond in two ways: export our financial technology and systems worldwide and embrace bitcoin as a strategic reserve asset instead of stifling innovation.

Lawmakers and politicians on both sides of the aisle, most notably President-elect Donald Trump, recognize the power of holding bitcoin on the nation’s balance sheet as a hedge against inflation. This direction would also strengthen U.S. resilience against economic challenges posed by China’s financial strategies.

The Federal Reserve, like many central banks, holds a diverse portfolio of reserve assets. As of 2024, this includes approximately $35 billion in foreign currencies and $11 billion in gold stock. These holdings demonstrate America’s economic strength and provide liquidity during financial stress. However, in our rapidly digitizing world, the absence of a native digital asset in this portfolio is becoming increasingly conspicuous.

With its global reach and growing adoption, bitcoin is the ideal candidate to fill this gap. Often called “digital gold,” bitcoin is a scarce commodity. The U.S. is the largest nation-state holder of bitcoin, having seized 210,000 coins from illegal actors. This gives the U.S. a first-mover advantage and could secure our economic future.

Critics may argue that bitcoin's volatility makes it unsuitable as a reserve asset. However, this volatility will likely decrease as adoption grows and the market matures. In 2021, El Salvador recognized bitcoin as legal tender and began purchasing it as a treasury reserve asset. They have seen a 100% increase in value and have no intention of selling.

A multi-front war

The U.S. must recognize we are already in a multi-front war with China. One of these fronts is financial services, and crypto is a weapon in our arsenal. Losing this battle means global financial services and individual financial activity would be dominated by adversarial states focused on control, surveillance and dominance — and a continued attack on our currency.

Trump understands this, telling Bloomberg in July, “If we don’t do it, China is going to pick [bitcoin] up.”

Projecting American financial power also requires the government to empower, enable and encourage our private economic sector to interact with contested economies throughout the Indo-Pacific and beyond. Expanding the use of our payment systems, banks and dollars — even where it’s controversial — is essential.

Right now, our adversaries are winning because we aren't even playing. They are exporting their systems, institutions and surveillance tools worldwide. Meanwhile, we’ve done little as TikTok, a serious threat to our national security, captivates an entire generation of Americans. We must do the same with financial technology because no disruption would be greater to our enemies.

The U.S. should more explicitly weaponize financial technology and crypto. For example, we should endorse decentralized financial technology that enables citizens of hostile governments like Iran to use smartphones to access USD-based stablecoins and payment services, in order to begin separating their economic activity from their government’s control. At its core, power is about control — not just of police or national security but of resources and economies.

The world is at a financial crossroads. The question isn’t whether digital currencies will shape the future but how we will adapt to this new reality. The U.S. can shape this future by embracing bitcoin as a reserve asset. The time for bold action is now, and the benefits for global financial stability and innovation could be profound.

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