When Gate TradFi Meets DeFi: How to Unlock the $26 Trillion Market

TradFi and DeFi have entered the “symbiotic era.” By 2025, traditional finance and decentralized finance are expected to move from parallel universes to full integration, with 88% of banks involved in some form of blockchain service, signaling the free flow of capital.

01 Integration Trend: From Parallel Universes to Symbiotic Networks

The financial system is undergoing a silent but profound transformation. Traditional finance and decentralized finance (DeFi) once operated like two parallel universes—one composed of banks, regulators, and complex intermediary systems, and the other driven by code, smart contracts, and decentralized protocols.

Now, these two systems are accelerating their integration, forming a “symbiotic network.” By 2025, digital assets are shifting from speculative tools to strategic asset allocations for institutions.

According to Gate analysis, the key to this integration lies in reconnecting value networks. For example, stablecoins and regulated protocols are helping banks and payment systems settle on-chain, providing new efficiency tools for traditional financial systems.

02 Core Scenarios: Unlocking Trillions of Dollars in Real Assets

Integration is not just a theoretical concept; it is taking root through tangible, accessible scenarios, creating new value for investors and the entire financial ecosystem.

Tokenization of real-world assets (RWA) is among the most notable scenarios. By 2025, the total value of tokenized government bonds has exceeded $600 million, allowing investors to indirectly lend to the U.S. government with an annualized yield of about 4.2%.

The RWA tokenization market is enormous. The entire traditional financial system is valued at approximately $600 trillion, providing DeFi with unprecedented liquidity opportunities. Traditional institutions like Goldman Sachs, Hamilton Lane, Siemens, and KKR have announced plans to bring RWAs on-chain.

The rise of strategy-based stablecoins is another landmark scenario. Take Ethena’s USDe, for example, which packages a delta-neutral hedging strategy into a $1 denomination token, essentially tokenizing yield products to generate returns for holders.

At the infrastructure level, protocols like Pendle play a crucial role. They decompose yield-bearing assets into fixed principal and floating yield, building on-chain interest rate markets and standardizing “spread hedging” and “yield transfer.”

The table below summarizes several key scenarios and their features in the current integration of TradFi and DeFi:

03 Technical Bridges: Addressing Interoperability, Compliance, and Security

Achieving seamless integration relies heavily on technical bridges. This mainly involves cross-chain asset and information flow, as well as compliance and security frameworks that meet institutional needs.

Interoperability protocols are key to asset movement. Protocols like CCIP, LayerZero, and Axelar Network serve as “blockchain abstraction layers,” enabling communication between different blockchains and greatly simplifying the integration experience of RWAs across multiple chains.

Singapore’s Monetary Authority-led “Project Guardian” exemplifies compliance innovation. It introduces the concept of “trust anchors”—regulated financial institutions that screen, verify, and issue verifiable credentials for entities participating in DeFi protocols.

This model provides the security and trust foundation needed for institutional participation in DeFi. Institutions like Goldman Sachs, J.P. Morgan, and SBI Digital Asset Holdings have conducted pilot transactions involving foreign exchange and government bonds under this program.

04 Challenges and Opportunities: Balancing Regulation and Innovation

The path to integration is not smooth. Regulatory frameworks vary significantly across regions, potentially limiting certain innovations; cross-chain operations and complex smart contracts pose technical vulnerabilities and security challenges.

Post-integration, risk transmission mechanisms may become more complex. The International Monetary Fund (IMF) notes that for DeFi to be widely adopted, it must incorporate regulatory and self-regulatory practices that maintain traditional financial stability.

Gate Ventures’ research insights highlight challenges faced by strategy-based stablecoins. For example, stablecoins based on derivatives hedging may have market size limitations tied to open interest in perpetual contracts. Meanwhile, growth of RWA stablecoins is closely linked to U.S. Treasury yield environments.

05 Platform Practice: How Gate Builds an Integration Ecosystem

As a leading global crypto asset trading platform, Gate actively embraces this trend and offers users opportunities to participate in cutting-edge financial integration through diversified products and services.

Gate has become an important gateway connecting to the RWA world. On the Gate platform, users can trade tokenized stocks like AAPLx, which allows 24/7 trading of fractional Apple shares and can be used as collateral in supported DeFi protocols.

Gate continuously researches and promotes innovative financial integration models. Gate Ventures has conducted in-depth studies on strategy-based synthetic stablecoins, analyzing nine major sources of yield, including on-chain lending, RWAs, and derivatives hedging.

The “Gate Learn” section aims to educate investors, helping users understand how complex protocols like Pendle and Terminal Finance serve as foundational elements for institutional capital entering DeFi and building the backbone of on-chain interest rate systems.

06 Future Outlook: Modular, Regulatory-Friendly, and Clear Yields

What does the future hold for the integration of TradFi and DeFi? A clear direction is emerging.

Modularity will become mainstream. Future financial applications will resemble LEGO blocks, composed of modular protocols that are freely combinable and functionally specialized. For example, yield sources, risk management, and compliance verification may be provided by different specialized protocols.

Regulatory adaptability will determine market size. Projects that proactively design compliant architectures and actively communicate with regulators will unlock trillions of dollars in institutional capital.

Transparency and sustainability of yields will be core competitive advantages. Institutional investors will no longer be satisfied with vague promises of “high yields”; they require clear, auditable, and risk-adjusted yield structures.

Future Outlook

Investment trends are quietly shifting. J.P. Morgan is exploring asset tokenization on private blockchains, while BlackRock is experimenting with tokenizing money market fund shares.

The intersection of traditional finance and DeFi is moving from the periphery to the core. For ordinary investors, this means easier access to new products like tokenized government bonds and strategy-based stablecoins through platforms like Gate.

Meanwhile, the next-generation financial infrastructure characterized by transparency, efficiency, and composability is being built before our eyes, ultimately serving a broader range of capital and assets worldwide.