Decentralized finance (DeFi) won't attract mainstream banks and large financial institutions until the industry solves its persistent hacking crisis, according to executives speaking at a major crypto conference in Paris. The security failures, particularly in blockchain bridges that connect different networks, are the primary barrier keeping trillions in institutional capital on the sidelines.

What's Stopping Banks From Entering DeFi?

The appeal of decentralized finance to traditional finance (TradFi) institutions is real, but it's being overshadowed by a mounting security problem. Industry leaders gathered at the Proof of Talk conference in Paris explained that banks see genuine long-term value in using blockchain technology to overhaul their back-office operations, not for speculative trading. However, the constant stream of exploits is making institutional clients nervous.

The scale of the problem became clear in April 2026, when security breaches were reported in 27 out of 30 days. Two major incidents alone, affecting the Drift Protocol and Kelp Dao lending platforms, resulted in nearly $600 million in losses to North Korean cybercriminals. These aren't isolated incidents; they represent a systemic weakness in how DeFi protocols are built and secured.

"I don't think you see a growth in DeFi until we fix the first problem, which is the hacks. I think it's an absolute problem until we solve the bridges. I don't think that DeFi grows outside of the DeFi degen community until they fix probably a whole stack," said Maja Vujinovic, CEO of investment and advisory firm OGroup.

Maja Vujinovic, CEO, OGroup

The core issue, according to DeFi developers and security experts, stems from a fundamental mismatch in how protocols are built. Developers prioritize innovation and new features while underweighting the critical responsibility of properly managing and protecting user capital.

How Are Traditional Banks Addressing These Gaps?

Rather than waiting for DeFi to fix itself, some major financial institutions are taking matters into their own hands. Societe Generale, one of Europe's largest banks, has begun building its own blockchain infrastructure specifically designed to meet institutional safety standards.

The bank's approach reveals what institutional clients actually want from blockchain technology. Instead of relying on open-source, non-custodial DeFi protocols where users hold their own private keys, institutions prefer the security and peace of mind that comes from regulated intermediaries. Societe Generale has tokenized structured products and green bonds on public blockchains, but discovered a critical gap: there was no safe way to settle cash transactions on-chain.

To solve this problem, the bank created its own regulated stablecoins, including EURCV and USDCV. A stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to a traditional currency like the euro or US dollar. By issuing its own stablecoins, Societe Generale created a complete settlement layer that institutional clients could trust.

"At the end of the day, we were stuck because there was only the securities leg on the blockchain, and we had no cash leg on the blockchain. That's why we started to issue a stablecoin," explained Stephanie Cabossioras, Chief Strategy and Global Policy Officer of Societe Generale Forge.

Stephanie Cabossioras, Chief Strategy and Global Policy Officer, Societe Generale Forge

Cabossioras also emphasized a fundamental truth about institutional finance: most clients, whether individuals or large enterprises, prefer to delegate custody and asset management to trusted third parties rather than managing private keys themselves.

What Needs to Happen for DeFi to Go Mainstream?

For DeFi to move beyond its current community of early adopters and attract serious institutional capital, the industry must address several interconnected challenges:

• Bridge Security: Cross-chain bridges, which allow assets to move between different blockchains, have become a primary target for hackers. Executives identified fixing these bridges as a non-negotiable first step before institutional adoption can accelerate.
• Developer Accountability: Protocol developers need to balance innovation with rigorous security practices and capital management. The current culture of moving fast and breaking things doesn't work when billions in user funds are at stake.
• Regulated Custody Solutions: Banks are showing that institutional clients want regulated intermediaries to hold their assets, not decentralized protocols. This suggests DeFi's future with mainstream finance may involve hybrid models combining blockchain infrastructure with traditional custodial safeguards.
• Stablecoin Infrastructure: Reliable, regulated stablecoins are essential for institutional settlement. Without a trusted cash layer on-chain, even well-secured DeFi protocols remain incomplete for institutional use cases.

The paradox facing DeFi is that its core appeal to institutions, the transparency and efficiency of blockchain technology, cannot be realized without solving the security problems that currently plague the ecosystem. Banks have the resources and expertise to build their own blockchain infrastructure, as Societe Generale is doing, but this approach sidesteps rather than solves the underlying DeFi security crisis.

Until DeFi protocols can demonstrate the same level of security and regulatory compliance that institutional clients expect from traditional finance, the flow of mainstream capital into decentralized finance will likely remain constrained. The next phase of DeFi growth may depend less on technological breakthroughs and more on the unglamorous work of hardening security, establishing clear liability frameworks, and building bridges between decentralized protocols and regulated financial infrastructure.