Decentralized finance has made major technological strides, but its fate now sits outside the blockchain industry, according to Chainlink co-founder Sergey Nazarov.
Key Takeaways:
DeFi’s main barrier is regulation, not technology.
Nazarov says mass adoption will start once institutions are legally allowed to deploy capital on-chain.
Momentum is already building as institutional stablecoin and tokenization activity increases.
In his view, DeFi has already proven what it can do; what it lacks is permission from the world’s financial superpowers to scale.
Nazarov believes the sector has advanced far enough to demonstrate that on-chain financial services are more transparent and efficient than traditional markets. Yet he argued that progress has now hit an invisible wall. Crypto users and developers are not the bottleneck anymore — legislatures are.
Global adoption depends on whether institutions are allowed to participate
Instead of focusing on retail user growth or speculative activity, Nazarov said the defining threshold for “mainstream DeFi” will be institutional capital moving on-chain without legal anxiety. For that to happen, he said, there must be a clear legal pathway that allows banks, funds and asset managers to invest client money in decentralized protocols without compliance departments blocking the transfer.
Once that shift happens, Nazarov expects the flow of capital into DeFi to become self-reinforcing, in the same way that stablecoin usage snowballed once corporations realized that competitors were accumulating the efficiency advantages of blockchain settlement.
The United States could flip the switch for everyone else
Nazarov argued that although regulatory transformation is global, the first domino almost certainly sits in Washington. Countries that rely on access to U.S. banking rails tend to align with U.S. policy decisions. If the U.S. gives institutions confidence to interact with DeFi, he expects that stance to propagate across financial hubs rapidly.
That expectation aligns with comments from others in the industry. Executives such as Curve founder Michael Egorov have repeatedly warned that regulatory uncertainty — not scalability, not liquidity, not user experience — is the No. 1 reason DeFi still has not broken through to everyday financial relevance.
Industry momentum is already here, even without full approval
Underlying metrics suggest that DeFi is not waiting for permission to grow. Research from Binance shows that lending platforms have expanded sharply this year, with cumulative total value locked surging from $53 billion to approximately $127 billion as 2025 opened. The boom is being powered by institutional use of stablecoins and tokenized real-world assets, a trend that Nazarov views as the early signal of a larger shift.
Where Nazarov expects the finish line
Instead of thinking about DeFi adoption in terms of the number of users, Nazarov prefers a different metric: the proportion of institutional money managed on-chain versus in traditional systems. Once those pie charts begin to level out, he said, the psychological barrier will crumble. At that point, blockchain-based markets won’t be “new” — just “normal.”
Nazarov believes the industry is nowhere near that endpoint yet, but it is no longer in the experimental phase either. His estimate is that DeFi is roughly one-third of the way to maturity, and the remaining distance will be covered not through better code but through governments deciding whether global capital is allowed to touch decentralized markets.
