How Top DeFi Projects Could Integrate with TradFi

Introduction: “DeFi and the American Spirit”

A fundamental shift is underway in U.S. crypto regulation. In June 2025, newly appointed SEC Chair Paul S. Atkins delivered a landmark speech titled “DeFi and the American Spirit.” In a sharp turn from the previous administration’s approach, Atkins explicitly endorsed core tenets of decentralized finance (DeFi) as aligned with American values.

Key policy signals from this speech include:

• Protection of self-custody rights, affirming individuals’ ability to hold crypto in personal wallets without mandated intermediaries.
• Recognition that staking is not a securities activity, reversing prior enforcement actions against proof-of-stake mechanisms.
• Developer and open-source protections, stating that writing or publishing decentralized code alone does not trigger securities or broker-dealer liabilities.
• Shift toward formal rulemaking, replacing “regulation by enforcement” with transparent public guidance and rules.
• Consideration of an “Innovation Exemption”, offering DeFi projects temporary, conditional relief to operate within defined parameters, encouraging responsible experimentation while regulatory frameworks are finalized.

These changes signal not just regulatory clarity, but a potential bridge between decentralized innovation and the legacy financial system. For top DeFi protocols, this new environment offers a rare window: the chance to integrate with TradFi infrastructure, partner with regulated institutions, and scale their utility far beyond the crypto-native world.

Strategic Positioning of Top DeFi Protocols

The table below assesses how major DeFi protocols may be positioned to benefit from a more favorable U.S. regulatory environment. “TradFi Integration Pathways” highlight how these protocols could embed into regulated financial infrastructure.

Uniswap: DEX Pioneer Poised to Flourish

Uniswap is the world’s leading decentralized exchange (DEX), facilitating peer-to-peer token swaps via automated market maker smart contracts. It currently holds roughly $4–5 billion in liquidity across Ethereum and multiple other chains. Uniswap's first-mover advantage and relentless product innovation (particularly with the V3 and V4 releases) have enabled it to maintain strong user market share, network penetration, and high protocol volumes despite heightened competition and incentives elsewhere.

Uniswap was created in November 2018 by Hayden Adams, a former mechanical engineer at Siemens, and is developed by Uniswap Labs, a software company headquartered in Brooklyn, New York, USA.

Key Strengths

Uniswap pioneered the concept of automated market making (AMM), fundamentally reshaping on-chain trading by removing the need for traditional order books. Its Uniswap v3 introduced a breakthrough with concentrated liquidity, allowing liquidity providers to allocate capital more efficiently within custom price ranges, dramatically improving capital efficiency and reducing slippage. Uniswap v4 introduces a new architectural leap with “hooks”, customizable smart contracts that enable developers to build new features like dynamic fees, on-chain limit orders, and composable strategies.

Uniswap has achieved a broad multi-chain presence, operating on major blockchains such as Ethereum, Polygon, Arbitrum, Optimism, Base, and others. Its recent launch of Unichain, a dedicated Layer 2 network built using the OP Stack, aims to provide native scaling for Uniswap, enabling faster and cheaper DeFi settlements while maintaining deep integration with the Ethereum ecosystem.

The protocol benefits from a robust governance system powered by the UNI token. The Uniswap DAO plays a significant role in funding ecosystem growth, managing protocol upgrades, and allocating resources such as the Uniswap Grants Program.

Integrated with TradFi as On-Chain Liquidity Layer

Amid growing regulatory clarity and support for innovation-friendly DeFi frameworks, Uniswap is well-positioned to bridge the gap with traditional finance. As institutions increasingly tokenize real-world assets (RWAs) such as U.S. Treasuries, equities, and private credit, Uniswap can serve as a core on-chain liquidity layer, offering 24/7 trading, deep composability, and automated market making through its established AMM model.

The Uniswap v4 further enhances this potential with its modular hooks architecture, enabling on-chain compliance features through hooks such as:

• Real-time KYC/AML verification
• Transaction monitoring
• Whitelisting of wallet addresses

These tools allow the creation of permissioned or compliance-aware liquidity pools, facilitating institutional participation without compromising protocol neutrality.

Source: https://v4.uniswap.org/

Moreover, Uniswap can be embedded into broker-dealer platforms as a backend DEX-as-a-Service provider, using smart order routing and APIs to supply regulated firms with real-time price discovery and liquidity for tokenized assets. This integration model positions Uniswap as both a foundational DeFi protocol and a compliant infrastructure layer for the evolving tokenized financial system.

Aave: Lending Protocol Ready for the Big Leagues

Aave is a decentralized money market protocol for lending and borrowing crypto. It is one of DeFi’s giants, with TVL around $24 billion making it the largest DeFi protocol by that metric. Aave allows users to earn interest on deposits and borrow assets against collateral, all through smart contracts. It has a global user base and has been proactive in working with institutions (e.g. Horizon, a new initiative designed to get more institutions using Aave.)

Key Strengths

Since its launch, Aave has built a strong reputation as a pioneer in the lending sector, supporting a wide range of crypto assets on major blockchains such as Ethereum, Avalanche, Polygon, and others.

Aave operates under a decentralized autonomous organization (DAO) model, where AAVE token holders propose and vote on protocol upgrades, new asset listings, incentive programs, and risk adjustments. This open governance structure fosters community engagement, iterative development, and protocol resilience. Notably, key decisions such as launching Aave V3 and expanding to new chains were determined through community consensus.

Security is a cornerstone of Aave’s design. Its conservative risk management practices, especially around asset onboarding and liquidity parameters, have helped the platform avoid major exploits despite operating at scale.

Integrated with TradFi

Aave can integrate with traditional finance through several strategic pathways that align with regulatory requirements and institutional needs.

One of the most direct routes is a permissioned version of the protocol built specifically for institutions. This framework allows regulated financial entities—such as banks, asset managers, and fintech firms—to participate in decentralized lending and borrowing within a whitelisted, KYC/AML-compliant environment.

Another avenue is the adoption of tokenized real-world assets (RWAs) on Aave. By allowing tokenized government bonds, real estate, or invoices to serve as collateral, Aave can attract traditional capital markets players. These assets would enable more familiar use cases such as borrowing against treasuries or supplying liquidity into yield-generating products that resemble fixed-income instruments.

In particular, Aave has developed Horizon, which aims to develop products that target the institutional adoption. Its first product will be a structured real-world asset solution that allows institutions to use tokenized money market funds as collateral to access stablecoin liquidity — with Aave’s stablecoin GHO serving as a primary liquidity source.

Aave can also form partnerships with neobanks and fintech companies, integrating DeFi yield strategies into consumer-facing platforms. In such models, users deposit fiat, which is converted into stablecoins and lent out on Aave. The generated interest is then passed back to the user, all within a seamless, familiar interface that abstracts away the complexity of crypto interactions

MakerDAO (Sky): Navigating New Stablecoin Regulations

MakerDAO, recently rebranded to Sky, operates the largest decentralized stablecoin, DAI ( as well as USDS under the Sky overhaul). Historically, DAI’s crypto-collateralized model allowed it to thrive outside traditional banking controls. As U.S. lawmakers advance the GENIUS Act, a comprehensive stablecoin bill, MakerDAO finds itself at a crossroads between benefiting from broader stablecoin adoption and grappling with new regulatory hurdles.

Key GENIUS Act Provisions at a Glance

• 1:1 Reserve Backing: Stablecoin issuers must back tokens fully with high-quality liquid assets on a one-to-one basis (e.g. each $1 stablecoin = $1 in USD cash or U.S. Treasury assets).
• Licensing & Oversight: Only “permitted stablecoin issuers” – entities licensed at the state or federal level may issue payment stablecoins in the U.S.. Large issuers (>$10B market cap) would fall under direct federal supervision (Federal Reserve/OCC), while smaller ones could opt for state oversight if equivalent standards are met.
• KYC/AML Compliance: All stablecoin issuers would be treated as regulated financial institutions under the Bank Secrecy Act. They must implement know-your-customer (KYC), anti-money-laundering programs, and sanctions screening similar to banks.

Conflict with MakerDAO’s Decentralized Model

MakerDAO’s DAI/USDS stablecoin design clashes with several core requirements of the GENIUS Act:

• Crypto Collateral vs. Fiat Reserves: DAI is largely backed by crypto assets like ETH and tokenized real-world assets, rather than holding an equivalent $1 in cash for every DAI. As of mid-2025, only 10% of DAI’s collateral is in U.S. Treasuries, with the vast majority coming from crypto loans.
• No Legal Issuer or License: DAI is issued by autonomous smart contracts, not a corporation. There is no registered company that regulators can license or audit as “the DAI issuer.” The GENIUS Act, however, limits stablecoin issuance to licensed entities under regulatory supervision.
• KYC Controls: MakerDAO is an open protocol: anyone with crypto can open a vault and generate DAI or trade it permissionlessly. There is no identity verification or transaction monitoring on-chain.

Potential Adaptations for MakerDAO

Recognizing these risks, MakerDAO’s community (spearheaded by founder Rune Christensen’s Endgame plan) is considering several strategies to survive and thrive under new regulations:

One straightforward response is to hold more traditional assets to back DAI, moving closer to the 1:1 reserve ideal. In practice, MakerDAO has already begun this shift – currently, over $1 billion DAI is backed by real-world assets like short-term U.S. Treasuries and bank deposits. Maker could ramp this up, allocating a larger portion of its collateral to stable, low-risk instruments (even if not fully abandoning crypto collateral).

Another adaptation is to create a compliant wrapper or parallel stablecoin that interfaces with U.S. markets. MakerDAO’s rebranding to Sky and the introduction of USDS appear to be steps in this direction. The new USDS stablecoin is designed with features to accommodate regulation, including an upgradeable freeze function that can lock tokens in response to legal requirements.