AI and DeFi: The End of Financial Gatekeepers
Cutting the Cords: How AI-Powered DeFi Lets You Fire Your Bank.
The Traditional Inefficiencies of Legacy Markets
Financial middlemen have long skimmed off the top of every transaction, adding cost and delay while contributing little real value. Consider a few examples of how traditional institutions extract value without truly creating it:
Banks – Legacy banks enjoy wide spreads between what they pay and what they charge. They often pay depositors almost nothing (average U.S. savings accounts around 0.3–0.4% interest) while charging borrowers 10–20× higher rates (e.g. ~7% on mortgages and ~15% on credit cards). That difference is pure profit for doing little more than shuffling money and credit risk. Everyday services are slow and costly too – a simple international wire transfer can take days and incur hefty fees due to layers of correspondent banks.
Brokers – Stockbrokers and other brokers historically charged high commissions for trade execution, a service now largely automated. Before online trading, a retail investor might pay $50 or more per stock trade; today, electronic markets and algorithms have slashed this to near-zero. Yet many brokers found new ways to monetize (like selling order flow), continuing to profit as unnecessary middlemen between investors and markets. They add friction – requiring you to go through them to buy or sell – even though the actual matching of trades is done by computers in microseconds.
Credit Rating Agencies – The “Big Three” ratings firms (S&P, Moody’s, Fitch) are supposed to assess risk, but in practice they profited by rubber-stamping Wall Street products. During the 2008 crisis, they gave AAA ratings to worthless mortgage-backed securities, misrepresenting toxic debt as safe investments. Why? Because issuers paid for those ratings – a glaring conflict of interest. A federal inquiry later found these agencies “were key enablers of the financial meltdown”. In short, ratings agencies extracted fees for blessing deals, but their assessments added negative value by fueling false confidence.
Hedge Funds – These exclusive investment pools charge “2 and 20” (a 2% management fee plus 20% of any gains), promising genius-level returns. In reality, most hedge funds underperform simpler, low-cost investments once those huge fees are deducted. Even Warren Buffett pointed out the absurdity: in 2008 he bet $1 million that an S&P 500 index fund would beat a basket of hedge funds over 10 years – and he won easily. The hedge funds’ hefty fees weren’t justified by their performance. This is rent-seeking at its finest: managers getting rich despite adding little value for investors.
Payment Processors – Every time you swipe a credit card, banks and card networks silently tax the transaction. U.S. interchange fees average around 2–4% of the purchase – a hidden surcharge built into pricesilsr.org. In 2023 these “swipe fees” totaled an astonishing $224 billion skimmed from merchants (and ultimately from consumers)ilsr.org. Yet the actual cost to process a card payment is practically zero: the Federal Reserve found it’s only about 3.4¢ per transaction on average – a tiny fraction of the ~$2–3 fee on a $100 purchase. Technology has made processing cheaper and faster, but those savings haven’t been passed on; instead, Visa and Mastercard (who together control ~85% of the market) maintain outrageously high fees thanks to their duopoly. It’s essentially a monopoly toll – with the average American family paying on the order of $1,000 extra per year in higher prices to fund these feesilsr.org. All this, even though card networks and banks add only nominal value in an era when digital payments could be near-instant and nearly free.
Each of these intermediaries lives off inefficiency. They thrive by inserting themselves in the middle – between saver and borrower, buyer and seller, investor and market – and extracting a fee, a delay, or an extra hurdle. We’ve accepted for years that “that’s just how finance works.” But much of it is dead weight. And now, new technology is making that painfully obvious.
Regulatory Choke Points
Why haven’t more efficient alternatives already replaced these middlemen? A big reason is that the regulatory structure itself often locks in the status quo. Outdated laws and rules act as choke points, protecting incumbents and creating artificial friction that prevents challengers from emerging.
In many cases, the government mandated the use of intermediaries or granted them oligopoly status. For example, U.S. regulations in the 1970s enshrined the Big Three credit rating agencies as official risk arbiterscfr.org. Banks, insurance companies, and pensions were required to heed those ratings, virtually guaranteeing Moody’s, S&P and Fitch a captive market.
This regulatory blessing helped them control 95% of the ratings business – an almost unassailable position. Even when their failures (like the 2008 debacle) became clear, it’s tremendously hard for new rating mechanisms or smaller competitors to gain trust, because the law still funnels business to the old guard.
Similarly, decades-old investor protection rules have ended up protecting the privileged instead of the public. The SEC’s “accredited investor” definition (dating back to 1930s securities laws) says you must be already wealthy to freely invest in certain private assets. The intent was to shield inexperienced folks from risky deals – but in practice it’s locking millions of capable, informed Americans out of high-growth opportunities.
You could be a financial wizard, but if you don’t meet an arbitrary net worth or income threshold, you’re barred from investing in startups or hedge funds. Meanwhile, a trust-fund heir with no financial savvy can invest simply because they’re rich. This absurd, archaic rule concentrates wealth-building opportunities in the hands of the already wealthy and the financial firms serving them. It’s a textbook case of regulation creating a moat for incumbents, under the guise of “investor protection.”
More broadly, the complex web of financial regulation favors those who can afford armies of lawyers and compliance officers – i.e. big banks and established firms. Want to launch a new fintech payment service? In the U.S. you’d face a nightmare of 50 state-by-state money transmitter licenses (unless you partner with a legacy bank). Want to start an innovative online bank? Good luck getting a bank charter; regulators have approved very few new banks since the 2008 crisis, making banking an exclusive club.
Every new financial product needs to navigate overlapping agencies (SEC, CFTC, Fed, etc.) with rules from a pre-internet era. Incumbents with lobbying power exploit this to box out upstarts. They lobby for ever-thicker rulebooks that they can handle (as cost of doing business), knowing it will smother smaller rivals. The result is a system that, as even experts admit, “dampens innovation, protects incumbent firms from competition, and…increases prices” for consumers. In other words, regulation has been captured by the middlemen – and is often wielded to keep them in power.
None of this is to say we should have a free-for-all with no oversight. But today’s rules are so outdated and heavy-handed that they effectively freeze finance in an old model. They assume we need brokers, banks, and gatekeepers to avoid chaos. This might have been true a century ago, but technology has moved on. Unfortunately, the legal system hasn’t kept up, creating a huge opportunity for anyone (or anything) that can route around the choke points.
DeFi and AI’s Role in Disruption
Decentralized Finance (DeFi) combined with Artificial Intelligence (AI) is rapidly dismantling the need for traditional intermediaries. DeFi is building a parallel financial system from scratch – one that runs on open protocols and smart contracts instead of centralized institutions. Meanwhile, AI provides advanced decision-making and automation that can replicate (or surpass) what human middlemen do, but at digital speed and scale. Together, they are disintermediating finance – cutting out the middle layers – in ways that were mere pipe dreams a decade ago. And this is not theory; it’s already happening in practice.
Payments and Money Transfer: One of the clearest examples is in payments. Blockchain-based stablecoins now move value across the world in seconds, for pennies, with no banks or payment processors involved. In fact, stablecoin transaction volumes have exploded – the total on-chain dollar value transferred via stablecoins reached $27.6 trillion in 2024, surpassing the combined annual volumes of Visa and Mastercard by about 7.7%. Why? Because stablecoins cut out the litany of correspondent banks and clearinghouses, allowing peer-to-peer transactions at a fraction of the cost, without the batching and delays of legacy systems.
On a blockchain, sending money just works 24/7 – no overnight batches, no waiting for “business hours.” Transfers that used to take days via SWIFT now settle in minutes or less. No more $40 wire fees and 3–5 day waits just to send your own money internationally. A small business can pay a supplier overseas instantly using a stablecoin, skipping the old banking gauntlet entirely. In short, DeFi payment rails make networks like SWIFT look like horse-and-buggy infrastructure – indeed, even industry insiders predict that blockchain-based rails could render SWIFT obsolete in the near future.
Trading and Investment: Decentralized exchanges (DEXs) and aggregators are similarly upending trading and investment. Platforms like Jupiter – the premier DEX aggregator on Solana – allow users to trade assets directly from their crypto wallets, using automated market-making algorithms instead of traditional brokers or market makers. There’s no need for a brokerage account or permission from any intermediary; it’s just code executing peer-to-peer trades.
Notably, DeFi trading volumes have scaled to rival, and sometimes exceed, those of centralized exchanges. Even back in early 2023, Ethereum’s leading DEX Uniswap handled over $70 billion in trades during March 2023, eclipsing Coinbase’s roughly $49 billion that month. Fast forward to today, and the momentum has only grown. In early 2024, Solana’s Jupiter aggregator surpassed Uniswap’s daily volume – processing about $480 million in 24 hours versus Uniswap’s ~$470 million (combined across its versions).
During that period, Solana’s overall DEX activity was on par with Ethereum’s (Solana logged ~$704M in one day vs. Ethereum’s ~$741M) and even overtook Ethereum on a weekly basis for the first time in late 2023. This trend continued into 2025: by May, Solana’s DeFi ecosystem had already facilitated over $800 billion in DEX trading volume for the year, with Jupiter alone accounting for 42% (about $334 billion) of that activity. Remember, Jupiter has no centralized operator – it’s just open-source code on Solana routing trades to where liquidity is best.
There are no deposit or withdrawal limits, no one to get between you and the market. Anyone with an internet connection can swap tokens or provide liquidity as they wish, with fees that are a fraction of traditional spreads. This kind of explosive growth versus major incumbents underscores how quickly DeFi can scale when it offers a better deal. Decentralization is turning finance into a true marketplace, not a series of toll booths, and networks like Solana (a high-speed, low-cost chain) are showing that this disruption isn’t limited to Ethereum alone – it’s a multi-chain revolution in the making.
The Final Phase: When People No Longer Need Approval
We are rapidly approaching a tipping point. What happens when the average person realizes they don’t need permission from financial gatekeepers anymore? When moving money, raising capital, or investing doesn’t require asking a bank or regulator for approval – it just requires an internet connection. That moment is coming, and it will mark the final phase of this revolution: mass adoption of fully decentralized, AI-driven finance and a corresponding exodus from traditional finance (TradFi) institutions.
Surveys indicate a massive shift in trust toward decentralized finance. By 2020, 47% of respondents said they trust Bitcoin over big banks, a leap from just 18% in 2017 (left). Younger generations show especially high confidence in crypto: in 2020, 51% of millennials preferred Bitcoin, versus only 7% of seniors (right). This trend suggests upcoming generations are ready to bypass traditional banks in favor of decentralized options.
Public sentiment is already turning. The trust in legacy banks is eroding, especially among the young and tech-savvy. In one survey, the majority of millennials said they now trust Bitcoin and crypto more than big banks. It makes sense – many came of age during or after the 2008 financial crisis and have seen banks embroiled in scandal after scandal. By contrast, an open-source protocol might seem more transparent and trustworthy. After all, Bitcoin’s code won’t lie to you or gamble away your deposits – you can verify everything on the ledger.
As the quote goes, “Be your own bank.” In a decentralized system, you hold your keys, you control your funds, and no one can freeze your account because they don’t like who you sent money to. This is a profound shift: finance is moving from a permissioned era (“May I do this, banker/regulator?”) to a permissionless era (“The code will execute my transaction as long as I meet the criteria – no one can arbitrary stop it”). Already, no third party can interfere with a Bitcoin transaction or a Jupiter trade – the networks are designed to be beyond any single entity’s control. People are beginning to grasp that financial freedom is possible. And once tasted, that freedom won’t be given up easily.
The breaking point will likely come when using DeFi and crypto becomes as easy as using any banking app – or easier. We’re nearly there. User-friendly wallets, intuitive interfaces, and AI assistants are smoothing out the remaining friction. Imagine a near-future scenario: You want a loan to buy a car. Instead of applying through a bank (filling out forms, waiting for credit approval, pledging collateral the bank holds), you go to a decentralized lending app.
Your digital identity (perhaps with reputation scores or verified credentials) and your assets speak for themselves – if you meet the protocol’s criteria, the loan is granted instantly by global liquidity pooled on the blockchain. No credit officer in a back room saying yes or no.
Or suppose you start a small business and need to raise capital. In a fully decentralized system, you could mint a token representing shares in your project and immediately sell it to investors worldwide, all through smart contracts. No exchange listing fees, no middleman taking a cut, no bureaucrat deciding if you’re “eligible.” Just you directly connecting with supporters who believe in your idea, enabled by code. This isn’t utopian – the building blocks (tokenization, decentralized exchanges, automated compliance checks) already exist. It’s simply a matter of integration and scale.
When a critical mass of people realize they gain more by exiting the old system than by staying, TradFi will face an existential crisis. We saw a glimpse in early 2023 when several U.S. banks faced runs and crypto platforms like stablecoins and DeFi exchanges saw usage spike – a small but telling vote of no confidence in the legacy system. In a future financial panic, savvy users might move en masse to stablecoins, decentralized exchanges, or Bitcoin as a safe haven instead of relying on FDIC promises or central bank interventions.
At some point, the center will not hold. Just as email and the internet made fax machines and postal mail largely obsolete, decentralized finance can make bank branches, wire services, and maybe even stock exchanges obsolete. Why wait days for a stock trade to settle or beg a bank for an international transfer limit increase, when you can do it permissionlessly in minutes on a blockchain? The comparison gets more lopsided each year.
Crucially, AI will accelerate this shift by making decentralized platforms smarter and more accessible. AI-driven interfaces can guide users through complex transactions, regulators can even deploy their own AI to monitor compliance in real-time on public ledgers (rendering the “we need intermediaries for oversight” argument moot), and investors can entrust AI agents to manage portfolios across dozens of DeFi services at once. The technical barriers that might have kept your grandmother from using Uniswap will disappear – perhaps she’ll simply tell her voice assistant to move her money to whatever combination of crypto assets yields the best return, and it will be done securely. When using decentralized finance becomes as easy as using Google – and more rewarding financially – people will flock to it.
At that stage, the old guard intermediaries either adapt or die. Some may adapt – we see banks now cautiously exploring blockchain, and fintech startups pushing regulators for clarity. But if they merely try to co-opt or slow down this movement via regulation, they’ll only create opportunities for more nimble decentralized alternatives (or for jurisdictions that embrace the new model to leap ahead). The logic of efficiency and open access is on the side of DeFi and AI. These technologies reduce friction in every dimension: cost, time, geographic limits, participation. They turn finance into a true peer-to-peer network, like how the internet made information sharing peer-to-peer.
In the final phase, financial power shifts decisively to individuals and communities. No more asking permission to innovate or transact. Value flows as freely as data flows on the web. Traditional intermediaries – the banks, brokers, funds, and payment networks that failed to provide value – will largely be disintermediated. They become optional or irrelevant. Perhaps they survive in niche roles or by providing better service at lower cost (competition is a great motivator), but they won’t be gatekeepers of the majority’s financial lives. We’ll look back on the era of high fees, slow transfers, and exclusive investment deals the way we look back on landline telephones and black-and-white TVs – quaint and clearly inferior to what replaced them.
The transition is already underway, and it’s picking up speed. Each time a barrier falls – each time someone uses DeFi to do something they once relied on a bank or broker for – the facade of indispensability crumbles. The future of finance is open, fast, and permissionless. AI and DeFi are not only eliminating many financial intermediaries; they are making it glaringly obvious that we never truly needed them. The sooner the world realizes this, the sooner we can all stop paying tolls to gatekeepers and start enjoying a financial system that is as dynamic, inclusive, and innovative as the technology now allows. The gatekeepers are being bypassed – and finance will never be the same.
