Morpho CEO: Institutional Interest in DeFi Remains Strong, But Shifts to Controlled Models
Paul Frambot, co-founder and CEO of Morpho, called several large institutions over the past week to understand the current state of DeFi, summarizing that institutional interest is ongoing and irreversible.
Institutions believe that distribution channels will not disappear, with massive AUM, payments, and loans shifting on-chain, and every fintech company plans to fully transition on-chain; however, they have completely lost trust in pool/hub models and require more control over code, risk, and compliance, while maintaining flexible connections to global liquidity.
In market mechanisms, institutions and distributors are accelerating the allocation of customizable DeFi products due to control demands. Under event-driven conditions, funds are flowing from traditional pooling protocols to modular protocols that support risk isolation and compliance, benefiting programmable liquidity platforms like Morpho, while pure pooling DeFi protocols are under pressure.
Source: Public Information
ABAB AI Insight
Paul Frambot previously led Morpho from lending optimization protocols to the Morpho Blue programmable architecture, having publicly emphasized institutional-level risk isolation needs multiple times in 2024-2025. His product line is designed to address compliance pain points of pool models, and this institutional survey continues his long-term dialogue with traditional finance.
In terms of capital pathways, Morpho collaborates with institutions like BlackRock and Ondo to deploy isolated warehouses and compliance modules, mobilizing billions of dollars in liquidity and integrating traditional distribution channels. The motivation is to transform the on-chain open liquidity network into an institutionally controllable infrastructure, helping financial institutions access global DeFi depth while retaining compliance sovereignty, achieving low-friction migration of AUM on-chain.
Similar to how institutions avoided early pool models of Aave and Compound and shifted to isolated warehouses, as well as cases in 2025 where several traditional asset managers turned to RWA customized pools, Morpho's current positioning is in the transition phase of DeFi from retail dominance to institutional control and compliance priority.
Essentially, this is a restructuring of the industry chain: the demand for institutional control is reconstructing DeFi from a unified pooling structure to a modular, isolated network, with mechanisms driven by regulation and risk preferences forcing capital to require an "open yet locally sovereign" architecture, achieving a structural change from indistinguishable liquidity pools to layered, programmable financial infrastructure.