a16z Says Wall Street Wants Blockchain, Not DeFi

Andreessen Horowitz’s crypto arm (a16z crypto) has challenged one of the crypto industry’s most common assumptions, arguing that traditional financial institutions are not adopting decentralized finance (DeFi) but are instead selectively embracing blockchain infrastructure.

In a policy article published on Wednesday, a16z crypto partner Christian Crowley and Business Development Lead Pyrs Carvolth argued that traditional financial institutions are primarily interested in blockchain’s efficiency rather than its permissionless nature.

According to the authors, banks and asset managers are adopting technologies that reduce settlement costs, improve capital efficiency, and automate financial operations while maintaining regulatory oversight and institutional controls.

Why Wall Street is picking blockchain

The report argues that financial institutions consistently evaluate technology through the lens of cost, operational risk, regulatory compliance, and customer control rather than decentralization.

Instead of integrating directly with permissionless protocols, institutions are adopting blockchain-based tools such as tokenized real-world assets (RWAs), stablecoin settlement, programmable payments, tokenized collateral, and atomic settlement.

The authors argue these technologies improve existing financial infrastructure without requiring firms to abandon traditional governance models.

Tokenization takes center stage

The article cites the rapid growth of tokenized finance as evidence that institutions increasingly view blockchain as financial infrastructure. It highlights initiatives involving BlackRock, Franklin Templeton, JPMorgan, SWIFT, and Circle, arguing these projects focus on improving traditional financial markets rather than replacing them with decentralized alternatives.

Circle’s institutional settlement network, Arc, is cited as an example of blockchain technology tailored for regulated financial institutions through compliance, operational controls, and trusted counterparties. According to a16z, this reflects a broader trend toward programmable financial infrastructure rather than fully permissionless finance.

Builders should stop treating institutions like DeFi users

Rather than encouraging crypto builders to adapt existing DeFi products for Wall Street, the report argues that institutions represent an entirely different customer base. Enterprise buyers, it says, prioritize procurement standards, legal certainty, operational resilience, and regulatory compliance requirements that differ significantly from those of crypto-native users.

The authors suggest developers should decide early whether they are building for institutions or open crypto networks because the two markets often require different products, distribution strategies, and business models.

Open DeFi still matters

Despite emphasizing institutional adoption, a16z does not argue that open DeFi has become irrelevant.

Instead, the report says permissionless networks remain the industry’s primary source of innovation, with many of today’s institutional blockchain applications originally emerging from open crypto ecosystems.

According to the authors, both ecosystems can reinforce one another. “The permissioned layer brings volume, legitimacy, and capital. The open layer keeps producing primitives, the permissioned layer adopts next.”

They conclude that future financial markets are likely to rely on shared blockchain infrastructure while continuing to support both institutional and permissionless applications.

Institutional blockchain adoption continues to accelerate

The report arrives as tokenization, stablecoins, and blockchain-based settlement continue gaining momentum across traditional finance.

Recent months have seen banks, exchanges, and asset managers increasingly deploy blockchain infrastructure for treasury operations, tokenized funds, collateral management, and cross-border settlement.

While the debate over whether traditional finance will eventually embrace permissionless DeFi remains open, a16z argues the current trend is becoming increasingly clear: institutions are adopting blockchain technology where it improves existing financial systems, not necessarily where it replaces them.

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