Interaction of Traditional and Decentralized Finance: Factors and Trends

The phenomenon of decentralized finance (DeFi) is today one of the epicenters of research interest in financial development problems. At the same time, the variety of issues related to DeFi that have been covered in the current scientific literature is limited by the general characteristics of this field, those that appear on the surface of phenomena and are associated with the features of the technologies used. At the periphery of the studies, there are questions about the description of the DeFi phenomenon, including from the perspective of its development, changes in relations with traditional finance (TradFi). Today, these changes are reflected in the increased interaction between TradFi and DeFi, which makes the task of investigating the factors and sustainability of this trend more relevant. The aim of the study is to determine the reasons for the displacement of market niches TradFi and DeFi, opening up a space for the activation of their interaction. The methodological basis of the study was the emerging theoretical concept of decentralized finance. Methods of qualitative analysis of the practice of interaction TradFi and DeFi, system and logical methods, induction and deduction were used, which allowed to identify causes and factors of interaction and mutual influence of each of the spheres, to identify problems in modern scientific discourse. As a result of the study, it was found that it is the opportunities of the financial market to use the advantages of the institutional conditions of TradFi and DeFi that determine the trend stability of their interaction, not antagonism. These opportunities are formed by the set of institutional conditions that accompany the functioning of TradFi and DeFi, and more fully they are realized in the field of tokenization of real world assets (RWA). A hybrid approach to analyzing the interaction between TradFi and DeFi leverages the strengths of both systems and reveals the growth potential of this interaction, including in the area of tokenization of real assets. Implementation of the proposed approach forms benefits for institutional investors, technology solution developers, TradFi and DeFi entities, opens up scope to improve the effectiveness of regulatory response to financial decentralization risks.

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