Decentralized finance is growing up, how DeFi is becoming 'NewFi'

As institutional interest in crypto grows, fueled by the introduction of Bitcoin and Ethereum exchange-traded funds (ETFs) in the United States, investors and industry participants are hotly debating the future of decentralized finance and its relationship to traditional finance or "TradFi."

At the heart of the debate is whether or not institutional involvement in crypto is a net positive or a net negative for the space. In a recent interview with Cointelegraph, James Toledano, chief operating officer of custodial wallet platform Savl, shared his thoughts on the future of finance.

The executive explained that institutional involvement in crypto will be positive for the long-term growth of cryptocurrencies, giving an  air of legitimacy to the nascent asset class and the underlying technology in the minds of apprehensive individuals, particularly in older demographics.

Toledano addressed the elephant in the room, acknowledging the potential for these large institutions to take over the crypto space by controlling all or a majority of a digital asset's supply but said that such a scheme was unlikely, explaining "If they did that, they would shoot themselves in the foot because most people wouldn't want to own it."

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Instead, it is much more likely that self-custodial options will make up the vast majority of the market, while financial institutions continue to coexist alongside decentralized finance, interacting with distributed protocols in what Toledano called "NewFi" or "New Finance."

"I think if institutions had like 20% of these assets and they were selling them a spot, ETFs, or whatever, then 80% were in the hands of the public. It makes sense."

Institutional inflows into digital asset investment vehicles

According to the latest CoinShares weekly inflow report, dated July 22, 2024, digital asset investment vehicles saw  $1.35 billion in inflows during the 7-day period, primarily driven by investors in the United States.

On July 23, 2024, Spot Ethereum exchange-traded funds went live on US stock exchanges, recording over $1 billion in trading volume within a single day, showcasing the intense institutional demand for crypto ETF products.

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