Global securities lending generated $9.64 billion in lender revenue during 2024, down 10% from the prior year according to DataLend.
This market, valued at over $12 billion overall, faces disruption from blockchain innovations.
platforms aim to shift equity lending onchain, potentially reshaping CeFi structures.
The Basics of Equity lending in CeFi
CeFi relies on centralized intermediaries for equity lending, where institutions borrow stocks for short selling or hedging.
Borrowers post collateral, and lenders earn fees, but opacity and custodian risks persist.
market Size and Traditional Dynamics
The securities market is projected to grow from $12.2 billion in 2024 to $21.5 billion by 2034 at a 5.7% CAGR, per Allied market Research.
CeFi dominates this space through established brokers and banks.
's Push into Onchain Equity lending
introduces decentralized protocols for equity lending, using blockchain to tokenize assets and automate processes.
This reduces intermediaries, lowers costs, and enhances transparency in the market.
Key Innovations Driving Change
Platforms like Aave and Morpho integrate real-world assets, allowing onchain lending of tokenized equities.
According to Galaxy Research, onchain yield sources include stablecoins and lending, attracting institutional capital.
lending enables variable interest rates based on utilization, often yielding higher returns than CeFi, as noted in Institutional reports.
CeFi vs : A market Comparison
CeFi offers regulatory compliance and stability, while DeFi provides accessibility and innovation without central control.
can deliver superior yields through undercollateralized lending, per Arf.one analysis.
Risks and Rewards in the Shift
Onchain models minimize counterparty risks by avoiding court battles in bankruptcies, as DCinvestor highlighted on X.
Traditional players must adapt, as Raoul Pal stated that CeFi's old models are ending, pushing toward DeFi and regulated wholesale markets.
Trends Bringing Institutional Capital Onchain
lending primitives draw trillions in institutional funds by simplifying access, according to Kiln's insights.
Tokenized equities via perps offer instant liquidity, scaling better than wrapped assets, as izebel_eth observed.
The market sees growing adoption of confidential with fully homomorphic encryption, enabling private uncollateralized loans onchain, per Zama.
Future Projections for the market
By 2025, digital assets may enable near real-time settlement in securities lending, transforming the $9.6 billion revenue landscape, as EY suggests.
CeFi entities integrating DeFi backends, like using Morpho, signal hybrid approaches.
Challenges in Transitioning to Onchain
Regulatory hurdles and smart contract vulnerabilities slow adoption in equity lending.
Yet, onchain portability turns shares into efficient collateral for global borrowing markets.
Actionable Steps for market Participants
Institutions should explore protocols like Compound for DeFi entry, analyzing onchain data to mitigate risks.
Diversify into tokenized RWAs to capture emerging yields.
This shift to onchain equity lending underscores 's role in modernizing markets.
It offers CeFi players a path to remain competitive amid evolving financial landscapes.
