Crypto for Advisors: What is DeFi?

DeFi, or Decentralized Finance, refers to a financial system built on permissionless blockchains that enables users to conduct financial transactions without intermediaries. A recent study showed that 18% of Americans have engaged with cryptocurrencies, while only 3% were aware of DeFi. This illustrates the gap in understanding and opportunity for advisors. DeFi empowers users to control their digital assets directly through several applications, including exchanges like Uniswap and lending platforms such as Aave. Despite unfamiliarity with the term, many Americans express interest in technologies that eliminate third-party intermediaries in financial transactions. Financial professionals can capitalize on this curiosity by educating clients about DeFi and its potential advantages. The upcoming suite of digital asset Exchange-Traded Products (ETPs) further facilitates exposure to this evolving sector. Ongoing trends, like real-world asset tokenization and the integration of artificial intelligence, signal a transformative phase for DeFi, with institutions entering for efficiency rather than speculation. This presents a unique opportunity for advisors to guide clients in navigating this innovative financial landscape and capitalizing on emerging technologies.

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