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Over the past 60 days, more than $600 million has been lost to crypto hacks, with the latest incident involving Kelp DAO’s reported $293 million exploit. The fallout is now raising concerns for parts of the traditional finance (TradFi) ecosystem that are exploring tokenization.
According to the report, DeFi lending platform Aave had indirect exposure to the Kelp DAO attack. The exploit involved attackers printing 116.5K rsETH “out of thin air” and using it as “worthless collateral” to borrow more than $190 million in high-quality assets, including wrapped Ethereum (WETH) from Aave.
As a result, Aave is reported to be left with more than $200 million in bad debt. The subsequent outflows are also cited as a potential factor that could unsettle Wall Street players considering expansion in the sector.
Since the weekend exploit, Aave has seen outflows totaling $15 billion. Jefferies analyst Andrew Moss said the update is likely to force Wall Street firms to pause or reassess plans as they evaluate risks tied to the sector.
“The potential loss of trust poses both near- and longer-term risks regardless of who is to blame.”
Tokenized assets—allowing on-chain trading of instruments such as stocks, ETFs, bonds, and other real assets—have gained traction. Since 2024, the tokenized market has grown six times, from $5 billion to $30 billion.
Early movers cited include BlackRock, Fidelity, and Franklin Templeton. The report also notes that Morgan Stanley, the New York Stock Exchange (NYSE), the Nasdaq, JPMorgan, and other firms are exploring tokenized assets.
Standard Chartered projected the tokenization segment could reach $2 trillion by 2028. However, the report adds that the industry’s reliance on the same chain bridges that have been exploited makes risk evaluation more important.
While Moss indicated that tokenization plans are unlikely to be abandoned, he said expansion may temporarily decelerate as firms reassess security risks.
“Although we don’t expect TradFi firms to throw in the crypto towel, the rollout or expansion of tokenization initiatives across banks, asset managers, fintechs, and payments may decelerate temporarily.”
Moss also said the sector is still in its early stages and needs time to mature.
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