Traditional finance (TradFi) and decentralized finance (DeFi) are steadily moving toward convergence. TradFi players are integrating more digital features into their offerings, while DeFi firms are working to become more mainstream.
That was the key takeaway from the breakout session Financial Evolution – TradFi and DeFi in Collaboration at the Sibos 2025 conference in Frankfurt.
“We’re seeing an increasing interest from digitally native firms in exploring how they can engage with core financial services,” said Brian Steele, Managing Director, President, Clearing & Securities Services at DTCC. “As the industry evolves, our aspiration is to foster greater collaboration between traditional and emerging financial players, so that clients can benefit from the strengths of both ecosystems. This convergence represents a significant opportunity for the future of financial markets.”
Related: The Role of Standards in Enhancing Market Efficiency and Consistency
Still, significant work remains before convergence can truly accelerate. TradFi and DeFi firms operate under vastly different regulatory regimes and follow distinct operating policies and procedures.
“Regulators have created a bit of a ‘walled garden’ around traditional finance companies,” noted Jens Hachmeister, Managing Director at Clearstream Holding AG. “New technology is entering the garden and expanding the garden a bit, but there is still a wall.”
Delivering Trust at Scale
Key issues must be addressed—such as replicating the trust levels of TradFi, ensuring settlement guarantees, and protecting customers when things go wrong.
“Trust, scale, resiliency and risk management are some of the core tenets of how DTCC manages its infrastructure today,” noted Steele. “We’ll need to achieve the same levels in all these areas as we look to integrate TradFi and DeFi.”
Donna Milrod, Executive Vice President and Chief Product Officer at State Street, echoed the importance of trust:
“Trust at scale is key; it gives clients confidence that their transactions and assets are safe,” said Milrod. “To get there we need standards, not just market best practices; that’s what underpins the security and scale of TradFi. DeFi is exciting; the question is, how do we get the best of both worlds?”
Unlocking Massive Opportunity
The potential is enormous—especially in asset tokenization. Tokenizing financial instruments like U.S. Treasuries or equities would enable a number of benefits for the industry, including collateral mobility, operational efficiency, and support for 24/7 market access.
Related: DTCC CEO Shares Insights on Evolving Markets and Technology
“We can tokenize assets and then integrate them into an L1 network,” noted Steele. “But we need the same level of trust and due diligence that exists with traditional investment instruments to give the market the same level of trust they have now with DTCC products and services. We take that role very seriously.”
If achieved, this convergence could harness the strengths of both TradFi and DeFi.
“At some point you’ll be able to mix and match assets,” said Hachmeister. “We could even see being able to convert from a digital asset to a token. We can create an entire new ecosystem that will enable far greater access to more kinds of assets.”
That said, true convergence may still be years away. A recent State Street client survey revealed that over half believe TradFi and DeFi will co-exist for at least the next decade.
As TradFi and DeFi continue to evolve, collaboration between the two worlds will be essential to unlock new efficiencies, expand access to capital, and build a more inclusive financial ecosystem.
While challenges remain, the dialogue at Sibos 2025 made it clear: the journey toward convergence is underway—and the opportunities ahead are too significant to ignore.