DeFi's Institutional Appeal Undermined by Persistent Security Risks, Says JPMorgan

According to JPMorgan, the persistence of security flaws and stagnant total value locked (TVL) in decentralized finance (DeFi) is hindering its appeal to institutional investors. TVL, which represents the total value of crypto assets deposited in DeFi protocols, is a key indicator of the ecosystem's size, usage, and overall health. The KelpDAO exploit, resulting in a $20 billion loss, exposed the structural risks associated with cross-chain bridges and the interconnectedness of DeFi protocols. This incident, along with others, has led to a shift towards stablecoins, such as Tether's USDT, as investors seek refuge from uncertainty. The report highlights that security vulnerabilities, including smart contract bugs and cross-chain bridge flaws, continue to pose a significant risk to the crypto ecosystem, eroding confidence and hindering growth. Despite gains in smart contract auditing, hack losses this year are comparable to 2025 levels, with infrastructure and bridge exploits remaining a primary vulnerability. The limited organic expansion and muted growth in TVL, particularly in ether (ETH) terms, raises concerns about DeFi's ability to scale for institutional use.