In 2025, how DeFi protocols are partnering with banks is a documented trend, from co-developing on-chain settlement solutions to integrating DeFi liquidity in regulated environments 

The fusion is being driven by necessity. According to a 2025 report from Chainalysis, over $400 billion in total value is now locked in DeFi protocols with institutional-grade compliance.

Meanwhile, global banks—including JPMorgan, HSBC, and Société Générale—have either piloted or deployed blockchain-native services with DeFi integrations.

This article explores how DeFi protocols are partnering with banks, why the shift is happening now, and how both sides are redefining the rails of finance, trust, and regulation. What once seemed like parallel paths is now becoming a convergence point for the future of money.

From Disruption to Integration: The DeFi–Bank Evolution

In the early days, banks saw decentralized finance as a direct threat. With its peer-to-peer architecture, DeFi bypassed intermediaries—cutting out the very institutions that had long controlled capital markets. 

Add to that the opaque regulatory environment around AML (Anti-Money Laundering) and KYC (Know Your Customer) compliance, and traditional banks had every reason to keep their distance.

But change was inevitable.

By 2023, the line between challenger and incumbent began to blur. The crypto-native market matured, and institutional investors started demanding exposure to DeFi yield strategies—but with guardrails. This growing appetite for regulated access to DeFi prompted banks to reconsider their stance.

How DeFi protocols are partnering with banks became a strategic conversation rather than a defensive one.Pilot programs started to emerge:

• Société Générale collaborated with MakerDAO to issue tokenized bonds backed by real-world assets.
• JPMorgan, through its Onyx division, tested Aave Arc, a permissioned DeFi lending pool tailored for institutions.

These weren’t just experiments. They were signals of a larger shift.

According to a joint 2024 BCG and World Economic Forum report, 80% of global banks had explored tokenization or DeFi integration use cases by the end of that year. 

From collateralized lending to tokenized securities issuance, the use cases have expanded beyond sandbox pilots into real-world applications.

This momentum underscores how DeFi protocols are partnering with banks to bridge on-chain efficiency with off-chain trust. It’s no longer about who replaces whom—but how they coexist and co-create.

Key Drivers Behind the Partnerships

The alliance between DeFi and traditional finance isn’t happening by accident—it’s being propelled by clear, mutual incentives. As the financial world digitizes at scale, three key drivers are accelerating how DeFi protocols are partnering with banks in 2025.

Real-World Asset (RWA) Tokenization

One of the strongest use cases drawing banks toward DeFi is real-world asset (RWA) tokenization. From bonds and trade invoices to real estate and carbon credits, tokenizing traditionally illiquid assets allows banks to unlock new revenue streams and streamline settlement.

DeFi protocols like Centrifuge, Goldfinch, and Maple Finance specialize in bringing RWAs on-chain, providing the infrastructure banks can plug into without building from scratch. These platforms enable fractional ownership, transparent auditing, and 24/7 liquidity—all qualities that legacy finance increasingly values.

This is a key area where how DeFi protocols are partnering with banks delivers both technological leverage and regulatory transparency.

Regulatory Bridges & Compliance Layers

Banks can’t participate in open DeFi without serious compliance guarantees. That’s where permissioned DeFi and modular compliance tooling come in.

Protocols like Aave Arc and Chainlink’s Cross-Chain Interoperability Protocol (CCIP) offer “compliance-first” frameworks. These let banks operate within DeFi ecosystems using zero-knowledge proofs, whitelisted wallets, and permissioned liquidity pools that meet AML/KYC requirements.

In essence, these bridges help answer the question of how DeFi protocols are partnering with banks without compromising institutional risk mandates. The tech adapts—without losing its decentralized ethos.

Liquidity + Innovation = Win-Win

Traditional banks often struggle with siloed liquidity and time-bound settlement windows. DeFi offers real-time liquidity, automated market-making, and composability—all of which banks can now tap into through collaborative protocols.

By engaging with DeFi pools, banks gain near-instant access to capital markets that operate globally and without downtime. In return, DeFi platforms benefit from institutional adoption, improved trust, and clearer paths to global regulation.

This dynamic underscores how DeFi protocols are partnering with banks to co-create a hybrid financial infrastructure—blending speed and scale with trust and compliance.

Notable Partnerships and Use Cases (2023–2025)

These real-world partnerships illustrate how DeFi protocols are partnering with banks to rewire core financial operations, from bond issuance to repo markets and trade finance.

Société Générale x MakerDAO

In a landmark 2023 transaction, Société Générale–FORGE, a digital asset subsidiary of the French banking giant, used MakerDAO to issue €30 million in DAI. The loan was collateralized by OFH bonds (Obligations de Financement de l’Habitat)—a traditionally structured debt instrument.

This marked a turning point in how DeFi protocols are partnering with banks, as MakerDAO’s decentralized liquidity was used to fund a regulated financial product, backed by real-world collateral.

JPMorgan Onyx x Aave Arc

JPMorgan’s blockchain division, Onyx, made headlines in late 2023 by running institutional pilot programs with Aave Arc, a permissioned DeFi lending platform.

The bank used tokenized Singapore government bonds and JPM Coin in a tokenized repo transaction, showcasing a secure, compliant use case for DeFi protocols within a tightly regulated banking environment.

This use case exemplifies how DeFi protocols are partnering with banks to streamline repo markets with greater transparency and faster settlement.

Siemens x Polygon

In early 2023, Siemens, one of Europe’s largest industrial manufacturers, issued a €60 million digital bond using Polygon’s DeFi infrastructure.

Although not a bank in the traditional sense, Siemens worked with financial partners to settle this bond via blockchain rails, sidestepping intermediaries and showcasing how institutional-grade issuance can occur via DeFi-compatible ecosystems.

This move emphasized how DeFi protocols are partnering with banks and enterprises alike, transforming capital markets infrastructure.

HSBC x R3 Corda (with DeFi Plug-ins)

HSBC has long been a pioneer in blockchain-based trade finance through R3’s Corda, but recent developments hint at deeper integrations with DeFi features.

In 2024, HSBC explored programmable lending and tokenized invoice financing using Corda’s hybrid blockchain, experimenting with DeFi plug-ins that could offer dynamic interest rates or composable lending contracts.

Benefits for Both Sides

The partnership works because both ecosystems bring something the other lacks. Here’s how DeFi protocols are partnering with banks to create a more resilient, liquid, and efficient global financial system.

For Banks

• Faster Settlement and Clearing: DeFi protocols enable near-instantaneous settlement, bypassing the multi-day delays of legacy infrastructure like SWIFT and ACH. This reduces operational friction and capital lockup.
• Global 24/7 Liquidity: By tapping into decentralized liquidity pools, banks gain access to capital markets that operate around the clock, across borders, and without centralized control.
• Reduced Counterparty Risk: Smart contracts automate trustless execution, significantly lowering exposure to intermediaries and human error in trade settlement processes.

These advantages showcase why institutions are actively exploring how DeFi protocols are partnering with banks to rebuild financial infrastructure from the ground up.

For DeFi Protocols

• Enhanced Legitimacy: Collaborations with regulated banks signal credibility to regulators, investors, and everyday users. This elevates DeFi from fringe finance to foundational infrastructure.
• Institutional Inflows: Partnerships invite billions in fresh capital. As compliance-friendly rails are built, pension funds, asset managers, and banks can participate safely in DeFi ecosystems.
• Expanded Use Cases: With bank collaboration, DeFi extends beyond crypto-native assets to real-world assets (RWA), central bank digital currencies (CBDCs), and sovereign bond issuance—creating entirely new markets.

Together, these benefits illustrate that how DeFi protocols are partnering with banks is not only reshaping finance—it’s creating a shared future where innovation and regulation move in tandem.

Challenges and Roadblocks

While progress is undeniable, the path forward is anything but frictionless. The question of how DeFi protocols are partnering with banks comes with important caveats. From technical hurdles to jurisdictional roadblocks, both sides face serious obstacles on the way to mainstream adoption.

Regulatory Fragmentation

One of the biggest challenges is regulatory inconsistency across regions. The U.S. maintains a cautious, enforcement-first approach, often classifying DeFi activity under securities law. Meanwhile, the EU’s MiCA framework promotes clarity, and APAC countries like Singapore and Japan are building DeFi sandboxes to encourage experimentation.

This patchwork makes it difficult for global banks to adopt unified DeFi strategies, especially when legal interpretations differ across borders.

Smart Contract Risks

Banks operate under strict risk frameworks and cannot afford untested systems. DeFi smart contracts—while efficient—can be vulnerable to exploits if not properly secured.

Formal verification, code audits, and insurance mechanisms are now prerequisites for any bank considering integration. These steps add complexity and cost, slowing down adoption.

This is a major factor shaping how DeFi protocols are partnering with banks—security is non-negotiable.

Custody and Identity Gaps

Institutional-grade custody solutions are still evolving. While some banks partner with custodians like Fireblocks or Anchorage, on-chain identity—including the use of Soulbound Tokens (SBTs) or KYC-linked wallets—is far from standardized.

Without robust identity layers, banks struggle to meet compliance mandates, limiting their interaction with open DeFi protocols.

Data Privacy Dilemmas

DeFi is built on transparency—public blockchains, open ledgers, visible transactions. Traditional banks, on the other hand, are bound by strict confidentiality laws around client data and financial transactions.

This tension makes it hard to balance visibility with privacy, and it’s a central debate in how DeFi protocols are partnering with banks going forward.

Realism Check: It’s Not a Stampede

Despite the headlines, most banks are still cautiously exploring DeFi via controlled environments and internal proofs-of-concept. Full-scale deployments remain rare.

The majority are operating in sandbox mode, awaiting regulatory clarity, technical maturity, and risk modeling improvements. Mass adoption may still take years, not months.

Conclusion

The narrative has officially shifted. The question is no longer whether DeFi and banks can coexist—it’s how DeFi protocols are partnering with banks to reshape finance from the ground up.

This collaboration isn’t just symbolic. It’s unlocking programmable liquidity, digitized real-world assets, and cross-border capital flows at a scale legacy systems could never achieve alone. Where once there was tension, now there is mutual value.

As regulatory frameworks mature and technological trust layers deepen, the line between TradFi and DeFi is set to dissolve. What emerges may not be “banking as we know it” or “DeFi in its purest form”—but a compliant, composable, global financial architecture powered by smart contracts and institutional credibility.

The bottom line? The future of finance isn’t DeFi vs. TradFi. It’s both—working together.

FAQs

How are DeFi protocols partnering with banks in 2025?

DeFi protocols are partnering with banks by enabling tokenization of real-world assets, building compliance-ready platforms like Aave Arc, and providing 24/7 liquidity through decentralized pools. These collaborations make DeFi usable for institutions without compromising regulation.

Why are banks interested in DeFi?

Banks are increasingly drawn to DeFi for its benefits—instant settlement, global liquidity access, and lower operational costs. Partnering with DeFi protocols helps banks stay competitive in a digital-first, programmable economy.

What risks do banks face when integrating DeFi?

Major risks include smart contract vulnerabilities, regulatory fragmentation, and identity verification challenges. For this reason, most integrations happen via permissioned DeFi, audited codebases, and institutional custodianship frameworks.