What is the difference between traditional finance (TradFi) and decentralized finance (DeFi)?

Traditional finance (TradFi) refers to conventional banking systems, stock markets, and financial institutions that rely on central authorities and intermediaries. Decentralized finance (DeFi), on the other hand, uses blockchain technology to offer financial services without centralized control. The companies in this theme are building the secure bridges that allow traditional financial institutions to safely access and interact with these decentralized markets.

What are KYC verification and compliance services?

KYC (Know Your Customer) verification is the process of verifying the identity of customers, typically required by financial regulations. Compliance services help financial companies follow legal requirements when dealing with digital assets. These services are crucial for institutions wanting to enter the crypto space while adhering to regulations, and many companies in this theme specialize in providing these essential services.

What is a "picks-and-shovels" approach to investing?

A "picks-and-shovels" approach refers to investing in companies that provide the tools, services, or infrastructure needed for an industry to function, rather than investing directly in the end product. The name comes from the Gold Rush era, where selling mining tools was often more profitable than mining itself. In this theme, rather than investing directly in cryptocurrencies, you're investing in companies that build the essential infrastructure enabling safe interaction between traditional finance and digital assets.

Why is regulatory compliance important for digital asset companies?

Regulatory compliance is essential for digital asset companies because it enables institutional adoption, reduces legal risks, builds trust with customers, and creates long-term stability. Without proper compliance, traditional financial institutions cannot participate in the digital asset ecosystem due to their own regulatory obligations. Companies in this theme specialize in creating compliant pathways, making them valuable as crypto adoption grows.

What are on-chain liquidity pools?

On-chain liquidity pools are collections of cryptocurrency funds locked in smart contracts on a blockchain. These pools provide the liquidity needed for trading, lending, and other financial activities in decentralized finance (DeFi). Traditional financial institutions need secure, compliant ways to access these pools, which is where the bridge companies in this theme come in - they provide the regulated infrastructure that makes this possible.

15 handpicked stocks

Decentralised-Finance Bridges

These forward-thinking companies are building secure, regulated connections between traditional finance and decentralized markets. They provide the essential infrastructure that allows banks and institutions to safely engage with digital assets as regulatory frameworks evolve.

Han Tan | Market Analyst

Updated 2 days ago | Published at juin 17