DeFi Trust Crisis Intensifies, Funds Flow to Compliant Stablecoins and Tokenized Treasuries
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Summary
Frequent DeFi security incidents have led to large-scale capital outflows, undermining market confid
According to BroadChain, at 18:00 on April 21, the theft of $292 million worth of rsETH from KelpDAO became another straw that broke the camel's back in market confidence. Previously, the security breach at Drift Protocol on April 1 and the Venus protocol's crisis in March had already severely impacted the industry. This latest incident directly led to approximately $10 billion in funds being withdrawn from the DeFi sector over the entire weekend. The accumulation of these crises highlights the severe challenges currently facing decentralized finance. Although the open-source ecosystem still exists, its core position as the default entry point for on-chain finance is being shaken. Stablecoins, tokenized treasuries, and compliant settlement channels continue to expand rapidly, while permissionless native protocols persistently suffer from market trust discounts. A review of a series of security incidents in 2026 reveals that risks have far exceeded mere smart contract vulnerabilities. For example, the approximately $285 million loss in the Drift protocol stemmed from permission abuse and operational architecture issues. Chainalysis's analysis uncovered new risks at the governance and signature mechanism levels. The Venus protocol exposed asset crises under weak liquidity, with attackers extracting about $14.9 million through inflated collateral. These incidents collectively point to one conclusion: what DeFi needs to defend is no longer just its code, but the entire complex operational system built upon it. Changes in capital flow confirm market choices. Although core DeFi reserves still exist on the Ethereum chain, funds are clearly shifting toward safer and more logically transparent products. Data shows that the total market capitalization of USDT and USDC combined is approximately $263 billion, while the scale of tokenized U.S. treasuries has reached $10.9 billion, held by over 55,000 individuals. Visa noted in its stablecoin strategy report that the total supply of stablecoins grew by over 50% in 2025 and predicted that 2026 would mark the beginning of formal institutional deployment. Its annualized monthly settlement volume for USDC has already exceeded $3.5 billion. This indicates that compliant traditional financial infrastructure is directly integrating into on-chain networks, no longer needing to rely on the narrative of native DeFi. The core of industry competition has shifted to the control of future on-chain infrastructure. Analysis suggests that compliant institutions are competing for an on-chain capital pool exceeding $330 billion. Unlike the bull market cycle of 2021, the future of on-chain finance is now being stripped of the chaotic risks associated with native DeFi and repackaged into more standardized products such as tokenized funds and stablecoin payments. In the first quarter of 2026, over 80 crypto projects have ceased operations or liquidated, as capital's patience for projects unable to generate long-term value is running out. Consequently, the positioning of native DeFi has narrowed. It can still serve as a laboratory for open innovation, but it is gradually losing its status as the front-end entry point for on-chain finance unless it can quickly rebuild trust, optimize architecture, and prove the irreplaceability of its complex design. The current landscape is clear: safer and more compliant on-chain packaged products are gaining the upper hand.