Like the eyes of traditional finances (tradfi) The Crypto lending market, community members explain how decentralized financial lending protocols can compete with what major financial institutions bring to the table.
On Tuesday, JPMorgan Chase, the largest bank in the United States, was reported to be exploring Lending directly against crypto assets Like Bitcoin (Btc) and ether (Eth), according to the financial times. An anonymous source said the bank could launch the offer once 2026, even if the plan was still in its early stages.
With a major tradfi player looking at the crypto lending market, the pressure on the defi lenders to keep competitive rises. However, 1inch co-founder Sergej Kunz told Cointelegraph that Crypto lending to Defi has undeniable benefits to traditional financial institutions.
Kunz featured user experience, broader collateral support and market fee optimization as some of the Defi’s benefits to Trade.
Defi supports more collateral options and better fees
“Defi lending platforms provide a simpler and more straightforward user experience,” Kunz told Cointelegraph. “Unlike Trade counterparts, they support a wider range of collateral options, and their destroying processes usually occur later than those in the tradfi.”
He added that Trade services usually charge higher fees, while defi platforms can benefit from optimizing market fees.
Gadi Chait, head of investment in the Xapo Bank, said Defi and Trafi are likely to serve different audiences, even though interest rates can be a point of competition.
Chait told Cointelegraph that while giant Transa-collateralized loans can offer lesses, he does not expect the rates to vary greatly.
“It is important to note that the DEFI usually has lower fees, which helps to offset any rate differences,” Chait told Cointelegraph, adding that the DeFI and Tradfi usually serve different markets.
Chait also said that while JPMorgan’s account base is significant, it only represents a limited part of the total addressable market:
“The lending space in crypto is wide, and there is a room for many players with different strengths.”
The unauthorized accession remains Defi’s strength
While consumption of Crypto Crypto of Tradfi, unauthorized access remains determined Defi’s advantage, according to Abdul Rafay Gadit, co-founder and chief financial official of the investment platform in social crypto Zignaly.
“While Trade’s major institutions may currently offer lower lending rates, they do this within strictly controlled frameworks,” Gadit told cointelegraph, which points to custodial risks, strictly aware of your customer requirements and geographical restrictions.
In contrast, Defi’s design allows anyone with an Internet connection and a purse to participate, without any paperwork or centralized approval.
Gadit said Defi should not try to compete with interest rates but should rely on what is unique. This includes composability, resistance to censorship and frictionless global access.
George Mandres, senior trader at the institutional digital-asset platform XBTO, said the expert was important.
Mandres told cointelegraph that traditional lenders are likely to dominate regulated lending markets for high-cap assets such as BTC, ETH and Stablecoins.
However, the businessman said that Defi’s side lies in the ability to offer access to ticking assets and use cases that are not likely to support large institutions:
“In the end, Defi may need to thrive on two tracks. One for retail, one for institutions.”
Related: Bitcoin-supported loans are ‘obvious’ to the next step-of-CEO of the Xapo bank
JPMorgan entry “Net Positive” for Crypto
Michael Carbonara, co-founder and CEO of Ibanera, a platform designed to bridge the traditional Finance and Web3 infrastructure, told Cointelegraph that JPMorgan’s potential entry into crypto lending can only be a “net positive” for crypto space.
Carbonara said institutional participation tends to bring better liquidity, infrastructure and legitimacy to emerging markets. It can be expanded today in the digital asset space.
“It acts as a validation of the broader digital asset space,” said Carbonara, who emphasized that the transition indicates the transfer of crypto to a more mature financial sector.
He said these developments have signed that traditional financial players are no longer passive observers of passive but active participants in the web3 economy.
“While it can raise regulation and competitive pressure for indigenous crypto players, increasing the legitimacy and impact of the network brought about by such incoming, it is likely that the ecosystem will benefit the whole,” Carbonara added.
While the JPMorgan looking at the lending of the crypto may be a interesting development, Tom Spiller, a legal crypto expert in Rosenblatt Law, told the cointelegraph that it was “not significant.”
Spiller said JPMorgan is “only interacting with a business line that has already been worth the history.” He also said that the potential product line that comes next year means they are prone to breeding – it is only done because others do it – who brings the subprime crisis.
“They are too slow to adapt to changing times,” Spiller told cointelegraph.
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