Definition
Traditional finance (TradFi) describes the established financial system of banks, securities markets, insurers and other institutions that provide payments, savings, credit and investment services. Crypto discussions use the label to distinguish this system from blockchain-native financial applications.
How It Works
Institutions maintain accounts, assess borrowers, match investors with funding needs and settle transactions through established financial infrastructure. Their activities generally operate within jurisdiction-specific legal and supervisory frameworks. TradFi can adopt blockchain technology, for example by issuing tokenized representations of conventional financial assets.
Key Considerations
TradFi and CeFi overlap but are not interchangeable: a centralized crypto exchange is not necessarily a traditional financial institution. Likewise, tokenizing an asset does not remove its issuer, custodian or legal dependencies. The relevant protections and obligations depend on the actual product and jurisdiction, rather than on whether its records use a blockchain.