Harnessing Decentralized Finance (DeFi) protocols for institutional asset securitization in cross-jurisdictional banking ecosystems

The emergence of Decentralized Finance (DeFi) has introduced a paradigm shift in global financial intermediation, challenging traditional banking systems with transparent, algorithm-driven, and blockchain-based financial services. As institutional investors and banks navigate increasingly complex cross-jurisdictional regulatory environments, DeFi presents an opportunity to reimagine asset securitization through decentralized, programmable frameworks. This paper explores the integration of DeFi protocols into institutional asset securitization, focusing on how smart contracts, tokenization, and decentralized liquidity pools can streamline processes, enhance transparency, and reduce reliance on intermediaries across disparate legal and regulatory jurisdictions. At a broader level, the study outlines the limitations of conventional securitization—such as opacity, time lags, and fragmentation—especially in multinational banking ecosystems. It then narrows in on how DeFi tools like automated market makers (AMMs), decentralized exchanges (DEXs), and overcollateralized lending protocols can be adapted to structure, issue, and trade tokenized asset-backed securities (ABS). Particular attention is paid to the challenges of legal enforceability, compliance, and interoperability between blockchain platforms and regulatory frameworks. Case scenarios and pilot initiatives are analyzed to demonstrate the feasibility of decentralized securitization in cross-border finance, including synthetic credit instruments and on-chain risk analytics. The paper further examines how oracles and compliance layers (e.g., KYC/AML-integrated smart contracts) can reconcile DeFi's permissionless nature with institutional governance standards. The findings support a hybrid finance future, where regulated entities harness DeFi infrastructure for secure, compliant, and efficient asset securitization. Policy recommendations are offered to foster collaboration between regulators, financial institutions, and protocol developers in building trust-minimized, scalable, and cross-jurisdictionally aligned financial ecosystems.