2026 Predictions: Decentralised Finance – from open experiment to institutional yield rail

This is an excerpt from our latest report: Zodia Custody 2026 predictions. Download the full report now to find out what next year holds for institutional digital asset custody.

Why now?

Yield and utility are converging

Institutions are realising that DeFi is no longer about speculation – it’s about efficiency. From BTC and ETH to tokenised money market funds and stablecoins, DeFi vaults are enabling higher yields at lower operational cost. As traditional rates stabilise and clients seek more competitive returns, secure access to DeFi liquidity has become a strategic differentiator for banks, asset managers, and treasurers.

Risk infrastructure has matured

Leading protocols now incorporate over-collateralised vaults, automated portfolio rebalancing, and real-time risk analytics. DeFi risk management increasingly mirrors traditional finance – focused on asset protection, diversification, and transparency – but delivered through programmable, auditable code.

Permissioned DeFi is bridging compliance

The rise of KYC-enabled, private liquidity pools is closing the compliance gap that once kept institutions on the sidelines. Borrowers and lenders can transact within verified networks, maintaining exposure to DeFi liquidity while meeting regulatory standards for counterparty and AML checks.

Tokenised real-world assets (RWAs) are expanding the canvas

DeFi vaults are now integrating tokenised Treasuries, MMFs, and other RWAs – deploying them as collateral to fund further purchases and generate compounded yield. This creates a new feedback loop between regulated instruments and decentralised liquidity, amplifying yield while keeping capital traceable and transparent.

Institutional impact

• Yield innovation: DeFi redefines how yield is generated, enabling programmable returns and liquidity reuse across tokenised assets.
• Capital efficiency: Institutions can optimise collateral deployment through looping and lending strategies, achieving yields that outperform traditional repo or MMF structures.
• Risk and governance: As curators and risk managers emerge within DeFi ecosystems, governance models are evolving to resemble institutional portfolio management with the transparency of on-chain auditability.
• Strategic positioning: Early institutional adopters will be able to design new client products like permissioned lending, on-chain collateral markets, or tokenised credit pools that blend DeFi’s flexibility with traditional oversight.

DeFi’s evolution is no longer theoretical. It’s becoming the programmable layer beneath institutional yield and liquidity management.

“We’re seeing a convergence of institutional liquidity with DeFi pools, unlocking fascinating new use-cases, from looping strategies with tokenised RWAs to hybrid borrow/lend models that combine DeFi liquidity with centralised collateral. Protocols like Morpho are proving that risk-managed DeFi can deliver compelling yields and transparency. By 2026, private DeFi vaults and permissioned markets will be core products for institutions.”

Sahil Sood,
Product Innovation & Advisory

Zodia in action

Zodia Custody is building the secure bridge that connects institutional capital to DeFi’s innovation safely, and at scale.

• Zodia Earn Network: Through our platform, institutions can access vetted decentralised applications (dApps) that deliver yield opportunities.
• Zodia DeFi vaults: In partnership with leading protocols, we’re launching curated DeFi vaults where clients can deploy assets into controlled liquidity pools – with embedded risk mitigation, collateral monitoring, and exposure management.
• Secure, compliant connectivity: Assets remain under Zodia’s custody, protected by our segregation model and policy engine, while we handle the secure routing of liquidity to approved dApps.
• Risk-adjusted performance: Vaults prioritise blue-chip or tokenised RWA exposure to deliver clear, stable returns that complement institutional portfolios.

The result: DeFi utility, delivered through a trusted custody framework, making digital-native yield safe, usable, and scalable for institutions.

 

This is an excerpt from our latest report: Zodia Custody 2026 predictions. Download the full report now to find out what next year holds for institutional digital asset custody.