Georges Koegel
Georges Koegel | INNOPAY
Georges Koegel
Martine Nau
Martine Nau | INNOPAY
Martine Nau
Yekaterina Travkina
Yekaterina Travkina | INNOPAY
Yekaterina Travkina
Wiebe Hendriks
Wiebe Hendriks | INNOPAY
Wiebe Hendriks

Rising interest in decentralised finance among top financial institutions

INNOPAY research indicates that almost half of the world’s top 150 banks are now investigating services based on decentralised finance (DeFi). This reflects rising interest in exploring possible benefits of integrating DeFi innovations within traditional banking frameworks. The evolution is collectively propelled by factors such as improved regulatory clarity (exemplified by initiatives like MiCA), a burgeoning fintech ecosystem that banks can tap into, and inherent advantages like leveraging existing capabilities and gaining first-mover benefits. So which DeFi components and value propositions are established financial institutions actively integrating and exploring? And what could this mean for your organisation? The insights in this blog will help you make an informed decision about whether, when and how to get involved with institutional DeFi.


Decentralised finance (DeFi) refers to existing financial products and services that can be recreated, utilising a decentralised architecture that sometimes also operates partially without the control of centralised companies and governments. Instead, the products and services leverage existing technology-based protocols, smart contracts and cryptocurrencies. Interest in DeFi is both growing and diversifying, with an expanding array of services and products being explored. As the Web3 landscape is evolving, traditional financial players are also delving deeper into Web3 and blockchain technologies. Web3 is a next iteration of the internet that includes protocols beyond DeFi. 

Established financial institutions (FIs) are experimenting with smart contracts and distributed ledger technologies to improve transparency, efficiency and security – three features inherently attractive in financial operations. Usage of DeFi protocols by traditional financial institutions with regulatory compliance and institutional-level controls for consumer protection, can be referred to as ‘institutional DeFi’. This evolution could mark a move towards a more open financial ecosystem where traditional financial services are reimagined through a decentralised lens, potentially reducing counterparty risks, keeping up with the increasing compliance burden and offering greater financial inclusivity. 

Reportedly, 90% of members of the European Payments Council believe that blockchain technology will fundamentally impact the industry by 2025. In a survey INNOPAY conducted last year among organisations active in payments (e.g. FIs, service providers), we found similar results, with 88% of the respondents indicating that they expect crypto to change the current financial services landscape in the near future.

One potential catalyst is the Markets in Crypto Assets (MiCA) regulation and other relevant regulations in the payments space (e.g. revised EU Transfer of Funds Regulation [TFR]). Such regulations are expected to bring further clarity and transparency to the space in terms of key roles and responsibilities (e.g. consumer protection, AML, liquidity) when offering particular services. On top of that, MiCA provides a unified regulatory framework that is attracting both international Web3 players and traditional financial institutions to the European market, allowing compliance across all EU countries. Europe’s cohesive approach can position it as a leader in the Web3 industry and help create a level playing field, increase trust and simplify the exploration and adoption of DeFi innovations for regulated FIs.



Considering these accelerating developments, we decided to analyse the current state of institutional DeFi activity among the top 150 FIs to assess which DeFi components and value propositions established financial institutions are actively integrating and exploring.

Our Activity Scan (Figure 1) resulted in an interactive model that consists of several elements: 

  • Overall activity* score: a measure of active vs. non-active FIs, represented as the percentage of the market covered by FIs actively exploring or pursuing the offering of DeFi related services
  • Application areas: relevant value proposition areas regarding DeFi innovations (top row, dark blue)
  • Relative activity: percentage of active FIs as a representation of the total sample of the top 150 FIs exploring or offering services related to respective value proposition (second row, light blue
  • Focus segments: insights into the percentage of active FIs focusing on retail, corporate or institutional customers


*Please note that with ‘activity’, we refer to all DeFi-related activities (exploration, pilots, offering, etc.) of FIs. We make no distinction in terms of quality/size of the activity (that information is mostly not publicly available). Furthermore, it is important to point out that being active does not guarantee that the FI will ever go over to offering such services to most or all of its customers in the future. To arrive at the sample, we analysed the websites and public communications of top 100 global FIs in terms of assets. We further enlarged our sample with other relevant local/regional FIs.


Key insights

  • Almost 50% (72) of the top 150 FIs in the Activity Scan are currently exploring or offering* DeFi-related services, meaning they are considered ‘active’ in our analysis.
  • The three most prominent value propositions among active FIs relate to custody services:


  1. providing storage and wallets for both crypto and tokenised assets is offered by 35% (50) of the top 150 FIs
  2. issued tokenised assets is offered by 23% (30 FIs) 
  3. on- and off-ramp conversions are offered by 20% (29 FIs)


  • At least 42 FIs are exploring or offering one of their services to institutional customers, 26 FIs are exploring or actively offering one of their services to retail customers, and a smaller group of 20 FIs focus with at least one of their services on SME/corporate customers. However, it remains difficult at this stage to segment FIs in this way.


*Please note that we currently cannot specify the percentage of customers that can access certain services. Many of the offerings are still in the exploratory phase or primarily catered towards institutional clients. Determining exact reach and adoption is therefore challenging. However, as activity increases, we anticipate that we will be able to further extend our model and provide a more granular analysis regarding institutional DeFi activity.

The below video shows a sneak peek into our activity scan. The full interactive model can be accessed here


The majority of the active FIs in the top 150 are engaging in custody services. ‘Custody’ refers to holding digital assets (e.g. cryptocurrency, NFTs, tokenised securities) on behalf of the customer to safeguard and facilitate control and management of said assets (e.g. to prevent them from being lost or stolen). Most importantly, this includes providing and managing wallets (Web3* accounts), but it can also include providing on- and off-ramp and crypto exchange services (e.g. converting fiat to Bitcoin, exchanging Bitcoin for Ethereum), while facilitating compliance with relevant rules and regulations.

*Please note that we only refer to Web3 when we are talking about services beyond DeFi, as well as licensing thereof.


The Activity Scan illustrates that the majority of active FIs are either already actively providing custody services or are in the exploratory stage. Our analysis shows that providing storage and wallets for tokens is offered by 27% of the 150 FIs, indicating this as one of the logical first steps in terms of value proposition development for FIs looking to integrate DeFi innovations. It is important to note here that such custody services can be offered to retail, wholesale and/or institutional customers. In contrast, the possibility for on- and off-ramp conversion and exchange services are offered by fewer FIs (21%), potentially indicating some caution in this area, perhaps related to the higher risk involved (e.g. fraud, market manipulation and volatility) and more complex capabilities (e.g. liquidity, market access, asset listing, tracking and maintenance).    

In the past months, numerous FIs (e.g. Société Générale, Deutsche Bank, Santander) have applied to their national regulators for custody asset licences to allow them to legally provide their customers with on/off-ramp, exchange and storage services regarding digital assets. Société Generale was the first FI to receive a French crypto licence in 2023. Meanwhile, back in 2021, Deutsche Bank announced plans to become a custodian and recently (June 2023) confirmed its application for a licence from the German regulator BaFin. Both FIs indicate in their corresponding statements that they want to focus first on offering institutional clients the possibility to hold cryptocurrencies and tokenised securities. 

Besides the traditional FIs, several neo-FIs and specialised fintechs are also offering custody services. PayPaland Revolut are among the most notable neo-FIs offering services in that area and are good examples of services focusing on retail banking customers. Furthermore, an increasing number of specialised fintechs are leveraging Web3 by offering custody services either directly to consumers or as white-label services to traditional FIs. For example, PostFinance in Switzerland announced that it will offer custody services to its customers as of spring 2024, leveraging the services of Sygnum, a regulated digital asset FI supervised by the Swiss Financial Market Supervisory Authority (FINMA). Similarly, Deutsche Bank announced its partnership with Swiss fintech Taurus to strengthen its capabilities.



So why are FIs exploring opportunities to offer custody services? Based on our analysis, we identified three reasons:

Building trust and following regulatory priorities

For FIs venturing into the DeFi and Web3 domain, commencing with custody services not only aligns with regulatory priorities (e.g. MiCA’s emphasis on custody) but also sets a strong baseline for trust and security – two vital tenets for any subsequent offerings regarding DeFI and Web3. In essence, by adopting custody services as an initial step, FIs can demonstrate compliance, underscore their commitment to client asset protection, and potentially pave the way for broader, more complex DeFi and Web3 services in the future.

Leveraging existing capabilities/offerings

FIs possess decades of experience in areas such as asset security, compliance and risk management. Adding DeFi and Web3 effectively could extend their existing custody service propositions and allow them to further scale up capabilities in terms of compliance (e.g. KYC, AML, taxes) and customer support/advice to offer customers a secure, regulated and seamless experience.

Strategic positioning option

Offering custody services could be seen as a strategic move to not only position FIs as forward-thinking organisations, but also to serve as a foundation for additional services and alignment with current market initiatives. Custody infrastructure can serve as the base layer for additional, more complex DeFi and Web3 services (e.g. staking, lending, transfer, etc.) in the future.



While the strategic decision to engage in custody services, other DeFi-related services or Web3 services (e.g. digital identity) is very much dependent both on the respective market scope and the context of the individual FI, we identified at least two stepping stones to consider when embarking on this journey:

Understanding the regulatory landscape

As MiCA and other regulations (e.g. Basel III crypto capital requirements) come into play, it is crucial to comprehend both the legal requirements and their practical implications. Engaging proactively with regulators and industry experts aids in grasping the consequences, while also highlighting potential opportunities and pitfalls associated with these regulations. Such insights inform decisions on whether and how to engage in Web3 custody services, positioning financial institutions to expediently secure the necessary approvals and licences. 


Navigating and capitalising on the Web3 ecosystem

The rapidly evolving Web3 ecosystem brings forth a new infrastructure including specific building blocks (e.g. smart contracts, tokens), new services (e.g. staking) and an array of new players. For FIs to discern the technical and business prerequisites, opportunities and risks, it is essential that they have a deep understanding of the current Web3 ecosystem including the relevant trends and developments. Offering custody services requires the integration of new technological capabilities (e.g. secure storage solutions, multi-signature wallets, secure key management systems). Partnering with specialised fintechs (e.g. Taurus, Sygnum, Metaco) and industry experts can accelerate the knowledge curve and aid in, for instance, crafting a resilient custody platform, as evidenced by PostFinance in Switzerland.


If you would like to dive deeper into the DeFi and Web3 regulatory landscape (e.g. licensing process), gain more insights into the DeFi and Web3 ecosystem (e.g. custody best practices), or discuss how INNOPAY could help you, please don’t hesitate to reach out to Georges Koegel:


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