DeFi Tokenomics News

DeFi and Tokenization Growth Still Falling Short of Expectations

by Crypto Hobby

Updated August 08, 2025

JP Morgan

JP Morgan's Latest Analysis on DeFi and Tokenization

JPMorgan's latest analysis indicates that the anticipated growth in decentralized finance (DeFi) and asset tokenization has yet to materialize, with progress remaining sluggish since the 2022 crypto winter.

The report highlights that key metrics like Total Value Locked (TVL) in DeFi have not recovered to their previous peaks, and institutional adoption is lagging despite advancements in compliance-ready infrastructure.

Key Takeaways

DeFi's Total Value Locked (TVL) has not reached 2021 highs, with activity primarily driven by crypto-native and retail users.
Institutional adoption is hindered by regulatory fragmentation, legal uncertainty surrounding on-chain assets, and smart contract security concerns.
Tokenization has seen limited success, with most initiatives being small, illiquid, or experimental, despite some traction in areas like tokenized bonds and money market funds.
Traditional investors remain hesitant due to blockchain's transparency, preferring opaque trading venues.
A fundamental lack of perceived need for blockchain in traditional finance is a major barrier, as existing fintech solutions already offer significant efficiency gains.

Institutional Adoption Stalls

Despite the development of compliance-ready infrastructure, such as permissioned lending pools and Know Your Customer (KYC)-enabled vaults, institutional adoption of DeFi and tokenization has been notably slow.

JPMorgan analysts point to several significant hurdles preventing wider uptake.

These include a fragmented regulatory landscape across different jurisdictions, ongoing legal uncertainty regarding the status of on-chain assets, and persistent concerns about the security of smart contracts.

Consequently, most institutional engagement with the crypto market remains concentrated in Bitcoin.

Tokenization's Slow Progress

The tokenization sector, while showing some signs of activity, has also struggled to meet expectations.

The report notes that while there are approximately $25 billion in tokenized assets and $8 billion in tokenized bonds, with growing interest in money market funds, the majority of these initiatives are small in scale, lack liquidity, or are still in experimental phases.

Prominent projects like BlackRock's BUIDL and Broadridge's Distributed Ledger Repo (DLR) platform have demonstrated potential efficiency gains, but they have not yet achieved significant scale.

In private markets, tokenization is heavily concentrated among a few key players, and there is a notable absence of meaningful secondary market activity.

Investor Skepticism and the Need for Blockchain

Many traditional investors continue to express skepticism towards blockchain technology.

A key concern highlighted in the report is blockchain's inherent transparency, which contrasts with the preference of many institutions for opaque trading environments, such as dark pools.

The increasing volume of off-exchange equity trading is cited as evidence of this preference.

JPMorgan's Nikolaos Panigirtzoglou suggests that even regulatory initiatives, like the SEC’s “Project Crypto”, may not be sufficient to overcome the core issue: traditional finance does not yet perceive a clear, compelling need for blockchain integration.

Existing fintech advancements have already improved speed and efficiency within the current financial system, reducing the urgency for institutions to adopt tokenized alternatives.