Decentralized finance (DeFi) is on the verge of mainstream acceptance, but significant challenges still inhibit its scalability compared to traditional finance, according to Sergey Nazarov, co-founder of Chainlink.
Nazarov asserts that DeFi is approximately 30% of the way to widespread adoption, emphasizing that clearer regulatory frameworks could significantly enhance this figure. The DeFi sector has displayed impressive growth this year, with the total value locked escalating from $53 billion at the beginning of 2025 to over $127 billion.
Nazarov Sees Progress, But Gaps Remain
In his assessment, DeFi could achieve 50% global adoption if regulation can articulate the trustworthiness of decentralized systems. However, this prediction hinges on how well regulators can manage ongoing dilemmas regarding on-chain features, the role of intermediaries, and the integration of established rules such as KYC and AML into permissionless systems.
Michael Egorov, founder of Curve Finance, echoes these sentiments, raising points about legal uncertainties, liquidity issues, and the inherent risks associated with smart contracts. Meanwhile, Michael Selig, chief counsel for the SEC’s crypto task force, underscores the necessity of addressing the intricate technical details of on-chain applications beyond the appealing notion of DeFi.
Regulation In The US Could Trigger Others
Nazarov believes that regulatory clarity is likely to emerge in the United States before permeating other nations, as many governments aim to remain compatible with U.S. finance. Analysts suggest that such a domino effect may create an optimistic scenario where clarity paves the way for banks and custodians to invest client funds into decentralized systems, thereby enhancing institutional flows.
Under this scenario, Nazarov envisions adoption rates potentially soaring to 70% when institutions find efficient ways to allocate client capital into DeFi. He anticipates that by 2030, we may witness full parity in the distribution of institutional capital between DeFi and traditional finance.
Institutions are gradually venturing into this space, with the popularity of stablecoins and tokenized assets on the rise. According to Binance Research, the performance of DeFi lending protocols has surged by 72% year-to-date, indicating a burgeoning capital foundation. Nevertheless, mainstream participation from pension funds, insurers, and major banks necessitates more robust custody solutions, clearer legal structures, and enhanced protections against potential exploits.
What To Watch Next
For the market, the essential indicators to monitor will be regulatory decisions in key jurisdictions as well as measurable inflows from institutional treasuries. Concurrently, end-users will prioritize transparency, security, and a clear accountability framework for when issues arise.
Nazarov’s forecasts are rather ambitious, reflecting a conviction among several industry founders that momentum combined with regulation can transition DeFi from niche applications to ubiquitous financial solutions. The reality of these prospects will depend significantly on regulatory actions, how swiftly institutions adopt tokenized frameworks, and whether DeFi networks can demonstrate their safety and reliability at scale.
Featured image from Vocal Media, chart from TradingView
