Why Institutions Are Quietly Moving Onchain

Benedetto Biondi is the CEO of Folks Finance, a leading crosschain lending protocol in DeFi.

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Automated smart contract-based lending has real demand, real advantages and real product-market fit.

Decentralized finance (DeFi) began as a niche experiment around 2018 tied to crypto assets. Today, it has grown into a market exceeding hundreds of billions of dollars, largely driven by stablecoin lending backed by collateral such as BTC, ETH and their derivatives.

Early users borrowed against long positions, leveraged exposure and arbitraged yields. While these behaviors were often speculative, they proved something more important: Automated smart contract-based lending has real demand, real advantages and real product-market fit. Institutions have noticed.

​Why Institutions Are Paying Attention

Over the past year, interest from financial institutions has accelerated. Asset managers, fintechs and banks are exploring how DeFi infrastructure could fit into their systems.​

DeFi lending is more efficient, not because it's just a new technology but because it removes layers of intermediaries that add cost, delay and complexity. Traditional settlement still takes T+1 or T+2 in most cases. Onchain (i.e., executed directly on blockchain infrastructure), it can happen instantaneously. As BlackRock CEO Larry Fink wrote in his 2025 annual letter, onchain tokenization could compress into seconds a settlement process that currently takes days, with billions reinvested immediately.

Transactions settle faster. Capital can be deployed more precisely. Operational overhead is reduced. Institutions can move parts (or all) of their lending use cases onchain and benefit from a structurally more efficient system.

Some of the world's largest financial institutions are already actively building onchain.

JPMorgan completed its first public blockchain settlement of tokenized U.S. Treasuries in May 2025, and in December 2025, it launched MONY, its first tokenized money market fund on Ethereum. BlackRock launched the $2.8 billion BUIDL tokenized money market fund with Securitize, the largest of its kind, available across Ethereum, Solana and Avalanche.

In October 2025, a consortium of nine global banks—including Goldman Sachs, Deutsche Bank, Citigroup, UBS, BNP Paribas and Santander—announced plans to explore a jointly issued stablecoin, backed 1:1 by reserves and available on public blockchains.

Institutions require controlled environments, defined risk frameworks, compliance integration and reliable liquidity. This is where the next phase of DeFi is being built.​

A Practical Approach To Onchain Lending For Institutional Players

For institutions evaluating this space, the real question is no longer whether onchain finance is interesting but where it can be interesting for them. For most banks, fintechs and asset managers, DeFi can improve their overall efficiency in meaningful ways, and the path forward for institutions doesn't require rebuilding the entire infrastructure.

From my experience building a leading crosschain lending protocol in DeFi, the best way for institutions to approach this is by identifying one contained use case in your offerings that would benefit from faster settlement, lower operational costs or broader liquidity access.

Stablecoin-denominated lending is often the most natural starting point, as the assets are familiar, liquid and increasingly regulated. Consider launching in one market first or moving one part of treasury or credit operations onto new infrastructure before touching anything broader.

Next, evaluate infrastructure that lets teams maintain control. The right onchain setup should allow teams to define their own risk parameters, compliance rules and collateral frameworks within an isolated environment, not force them into a shared pool with unknown counterparties.

Where Does Compliance Sit?

For institutions, compliance can't be an afterthought, but it also doesn't need to be forced into the base infrastructure itself. In many cases, the better model is to apply compliance at the level where the institution interacts with users, counterparties and capital.

That means the institution can implement onboarding rules, KYC/KYB requirements, transaction monitoring, access controls, internal approvals and reporting standards within its own environment without changing the underlying rails.

The regulatory landscape is rapidly catching up. The EU's Markets in Crypto-Assets Regulation (MiCA) fully came into application in December 2024, creating a unified framework across 27 member states for crypto-asset service providers and stablecoin issuers. In the U.S., the GENIUS Act was signed into law in July 2025, establishing the first federal regulatory framework for stablecoins. These developments give institutions a clearer path to operate onchain within recognized legal guardrails.

This matters because it gives institutions a more realistic path onchain. They don't need to choose between full openness and full restriction. They can keep the core efficiency of onchain systems while still operating within the controls their business, regulators and internal stakeholders require.

In practice, this is what makes onchain lending more viable for financial institutions than many assume. The right infrastructure shouldn't ask an institution to give up its compliance framework. It should give it better tools to express that framework in a faster and more transparent system.

Start Narrow, Then Scale

A common mistake is to think that moving onchain has to begin with a full transformation plan. It usually shouldn't.​

Institutions don't need to become "DeFi-native" overnight. Once they identify where onchain systems can improve speed, cost structure, transparency or capital access in a measurable way, expansion becomes much easier to justify internally.

The institutions that will benefit most from this shift are unlikely to be the loudest. They'll be the ones that approach it with discipline: Start with a real use case, choose infrastructure that preserves control and scale from there.

More institutions are quietly moving onchain because in the right context, it's simply better infrastructure.​

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