Key Highlights
- ARK Invest’s Lorenzo Valente challenged a16z crypto’s recent thesis that Wall Street wants blockchain rather than DeFi.
- Valente argued public blockchains have consistently outperformed permissioned enterprise networks.
- He said crypto-native firms like Circle, Coinbase, Securitize, Aave, Morpho, and Uniswap are becoming the new institutional financial layer.
A day after venture capital firm a16z crypto argued that traditional financial institutions are embracing blockchain technology while largely rejecting decentralized finance (DeFi), ARK Invest has publicly challenged that conclusion, saying the industry’s long-term direction favors open blockchain networks rather than permissioned systems.
In a detailed response posted on X, Lorenzo Valente, Director of Research at ARK Invest, described a16z’s analysis as “overly bearish and simplistic,” arguing that the report underestimates the advantages of permissionless infrastructure.
Valente’s comments directly respond to a16z’s recently published article, TradFi Doesn’t Want DeFi. It Wants Blockchain, which argued that banks and financial institutions are primarily adopting blockchain technology to improve settlement, payments, tokenization, and operational efficiency while avoiding DeFi’s permissionless characteristics.
Why ARK thinks private blockchains keep falling behind
One of Valente’s main criticisms centered on a16z’s comparison between institutional blockchain adoption and earlier enterprise technologies such as private cloud infrastructure and corporate intranets. According to him, those examples actually support the opposite conclusion. “Private intranets don’t really exist anymore. Private cloud lost badly to AWS, Azure, GCP,” he wrote.
Valente argued that enterprise technology historically moves toward open infrastructure rather than remaining fragmented across private systems. He also pointed to what he described as the crypto industry’s “private-chain graveyard,” citing projects such as R3 Corda, Hyperledger Fabric, Quorum, and several early institutional blockchain initiatives that failed to generate meaningful economic activity.
Meanwhile, he noted that tokenized assets, stablecoins, and real-world asset (RWA) markets have increasingly developed on public blockchains such as Ethereum, Base, and Solana.
Open liquidity cannot be recreated behind institutional walls
Valente also rejected the idea that financial institutions can simply adopt selected DeFi features while keeping markets permissioned. He argued that many of DeFi’s key advantages, including global liquidity, composability, and capital efficiency, exist precisely because the networks remain open.
“Global 24/7 liquidity, cross-protocol collateral efficiency, permissionless integration… are emergent from openness,” he added.
According to Valente, those network effects cannot simply be recreated inside permissioned blockchain environments. He pointed to the continued dominance of USDC and USDT, arguing that even institutions increasingly choose open stablecoins over private alternatives because markets consistently reward interoperability and accessibility.
Circle, Coinbase, Aave and others are changing the playbook
Valente also challenged a16z’s framing of the future as a choice between traditional finance and DeFi.
Instead, he argued that an entirely new category of financial infrastructure is already emerging. Companies including Circle, Coinbase, Anchorage, Securitize, Superstate, Aave, Morpho, LayerZero, and Uniswap, he said, are building institutional-grade financial infrastructure directly on public blockchain networks.
“They’re not TradFi, selectively adopting DeFi. They’re not DeFi. They’re a new institutional layer being built from scratch on public rails,” he said.
Rather than serving legacy financial institutions, Valente argued these crypto-native firms are increasingly capturing market share that incumbents are expected to lose over time.
Debate reflects broader institutional shift
The exchange between ARK Invest and a16z highlights one of the industry’s biggest strategic debates as institutional blockchain adoption accelerates.
While a16z argues banks will primarily adopt blockchain infrastructure that preserves compliance, control, and existing operational models, ARK contends that history favors open networks and that crypto-native infrastructure providers are already becoming the foundation of institutional finance.
As tokenized assets, stablecoins, and blockchain-based financial markets continue expanding, the debate underscores two competing visions for how Wall Street’s on-chain future will ultimately evolve.
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