Will This Be the Year That DeFi Goes Mainstream?

Decentralized finance (DeFi) aims to recreate traditional financial (TradFi) services — payments, lending, trading and asset management — on blockchain networks, without relying on centralized intermediaries. 

Until recently, DeFi was considered a niche segment of the crypto ecosystem, primarily used by tech-savvy traders and early adopters. Its appeal was limited by volatility, regulatory uncertainty and the complexity of on-chain protocols.

However, in recent months both governments and major financial institutions have been quaffing the DeFi kool-aid, as is detailed in the 10th edition of ARK Invest’s flagship ‘Big Ideas’ report, which dropped earlier this month.

In total, the report unpacks 13 big ideas, ranging from artificial intelligence infrastructure to autonomous vehicles, but two interlinked chapters are particularly relevant to us here: those on tokenized assets and DeFi applications.

Stablecoin Spike

A stablecoin is a blockchain-based digital token designed to maintain a stable value by being pegged to a fiat currency or other low-risk reserve asset. It functions as the primary settlement layer for many DeFi processes, enabling on-chain trading, payments and yield generation, with a price stability that underlying cryptocurrencies lack. 

The ARK report lays out how stablecoin activity hit new highs in 2025, partly thanks to the newfound regulatory clarity associated with the Guiding and Establishing National Innovation for US Stablecoins, or GENIUS, Act.

Signed into law in July by US President Donald Trump, the GENIUS Act requires stablecoins to be backed one-for-one by US dollars or other low-risk assets. This sets a rigorous benchmark for reserve composition, audits and transparency for buyers. Before it passed, stablecoin issuers were not obliged to maintain full 1:1 backing with low-risk assets. The Act represents an initial move toward a dual federal-state regulatory framework and enhanced consumer protection.

Off the back of the GENIUS Act, ARK noted, “multiple companies and institutions announced initiatives to launch their own stablecoins, while BlackRock [BLK] disclosed preparations for an in-house tokenization platform.” 

In parallel, stablecoin issuers and fintechs like Stripe, Tether [USDT] and Circle [CRCL] launched or backed stablecoin-optimized Layer 1 blockchains.

This spike in institutional uptake has further accelerated stablecoin-related activity.

The trailing 30-day average of adjusted stablecoin transaction volume reached $3.5trn in December 2025 — around 2.3 times the combined transaction value of Visa [V], PayPal [PYPL] and global remittances.

Moody’s Leans In

A major sign of the institutional uptake that stablecoins are currently seeing is the fact that rating agency Moody’s [MCO] proposed a methodology for rating them at the end of 2025. 

Moody’s stablecoin assessments will align with its traditional credit ratings, evaluating the quality of reserve assets, exposure to market fluctuations and operational safeguards. 

Historically conservative about extending its brand beyond traditional credit risk, Moody’s move is indicative of the growing confidence in the stablecoin market. 

The agency’s 2026 Outlook highlighted how blockchain and shared digital infrastructures are “blurring boundaries” across finance sectors, while regulatory initiatives — from the Markets in Crypto-Assets (MiCA) regulation in Europe to US proposals and licensing in Singapore, Hong Kong and the UAE — reflect a converging global framework. 

Tokenized Assets Climb

We could think of stablecoins as the liquid medium that enables tokenized assets to be traded, settled and valued reliably on-chain. 

A tokenized asset is a real-world or financial asset — such as equities, bonds, real estate or commodities — represented on a blockchain as a digital token. Tokenization enables fractional ownership, faster settlement and programmability, allowing assets to be traded, collateralized and managed on-chain.

Enabled in part by the increased respectability of stablecoins, the market for tokenized real-world assets (RWAs) surged 208% to $18.9bn in 2025. ARK notes that BlackRock’s $1.7bn BUIDL money market fund dominated US Treasury tokenization, representing 20% of the $9bn total. 

Tokenized gold-led commodities from Tether [XAUT], at $1.8bn, and Paxos [PAXG], at $1.6bn, together accounted for 83% of the sector. Tokenized public stocks neared $750m.

ARK estimates that the global market for tokenized assets could top $11trn by 2030 — assuming that progress is made on regulatory clarity and institutional-grade infrastructure.

Closing the Gap with TradFi 

The gap in on-platform assets between traditional fintech firms and crypto-native platforms is shrinking, according to ARK, signaling a merging of conventional and on-chain financial infrastructures. 

DeFi protocols — ranging from liquid staking to borrowing and lending platforms — are drawing significant institutional capital and expanding quickly. Among the top 50 DeFi platforms, each one holds over $1bn in Total Value Locked (TVL). Coinbase [COIN], the largest, has over $500bn in TVL, while Robinhood [HOOD], the second-largest, boasts somewhat more than $300bn TVL.

This tendency is set to continue. 

As The Block noted in its ‘2026 Digital Assets Outlook’ report, “2025 pushed DeFi further along its maturity curve, with discernible credit cycles, growing institutional inflows, and increasingly robust trading venues”. Furthermore, “the ascent of RWA tokenization showed that institutions now view blockchain infrastructure as a viable distribution channel.”

2026 Checklist

The giant steps that DeFi took in 2025 have prepared the ground for a sustained growth phase. 

Increasing institutional investment across markets signals rising trust in on-chain infrastructure, which is nearing parity with centralized systems in terms of reliability and execution. 

Macro conditions, however, remain the dominant factor shaping scale. Credit availability, market depth and retail engagement will depend on overall liquidity trends. If global liquidity becomes supportive, DeFi’s increasingly robust infrastructure could drive more lasting expansion. 

However, longer term, The Block warns, “sustained expansion will require stronger risk management to mitigate systemic vulnerabilities inherent to a composable ecosystem.”

By way of conclusion, here goes a checklist of trends to monitor over coming months.

1. Institutional adoption: Look for continued inflows from banks, asset managers and hedge funds into liquid staking, lending protocols and tokenized RWAs. Institutional engagement could drive TVL growth and credibility. One area of interest will be the expansion of ETFs covering the broader blockchain space — will investor appetite for them run out at some point?

2. Regulatory clarity: The implementation of MiCA in Europe, US stablecoin and market structure proposals, and frameworks in Singapore, Hong Kong and the UAE will shape which DeFi products can scale globally. Regulatory alignment could accelerate adoption, while fragmentation could slow it.

3. Tokenized assets expansion: Expect growth in tokenized equities, bonds, gold and other commodities. Stablecoins will remain the liquidity backbone enabling on-chain trading of these assets. It’ll be interesting to see if gold prices continue to soar, and how that interacts with DeFi.

4. Risk management: As protocols interconnect, systemic risk becomes more complex. Platforms that strengthen audits, insurance and safeguard mechanisms will attract more capital. This is the context behind Moody’s incursion in the space.

5. Market liquidity and macro conditions: Global liquidity, interest rates and credit conditions will directly influence borrowing, lending and market depth in DeFi.

6. Innovation: DeFi-native financial products could expand beyond traditional use cases, drawing sophisticated investors and hedging strategies.

7. Infrastructure parity: Execution speed, reliability and UX improvements will make on-chain platforms more competitive with centralized fintech.