JPMorgan says hacks and capital stagnation undermine DeFi's institutional appeal

Hacking and capital stagnation are undermining the appeal of decentralized finance (DeFi) for institutional investors, JPMorgan said in a recent note, CoinDesk reported. The bank highlighted the systemic risks in DeFi, pointing to the $20 billion loss from the KelpDAO hack. JPMorgan stated that hacking and exploits are core risks in cryptocurrency systems because they directly erode trust in platforms that rely on code rather than intermediaries. A single vulnerability can lead to massive losses, and despite improvements in smart contract audits, weaknesses in infrastructure and bridges remain a significant issue. Amid these challenges, investors are moving their funds into stablecoins. The bank noted that following the hack, capital from DeFi lending flowed into Tether (USDT), which is favored as a safe-haven asset due to its high liquidity and fast withdrawal capabilities.