Code and Trust: The New Layer of Finance
In recent weeks, we've discussed the new infrastructure of finance, where stablecoins and blockchain are becoming the backbone not just for money transfers but also for income, credit, and production flows, the cornerstones of traditional finance.
In recent weeks, we’ve discussed the new infrastructure of finance, where stablecoins and blockchain are becoming the backbone not just for money transfers but also for income, credit, and production flows, the cornerstones of traditional finance. This week, we’re diving deeper into that infrastructure: trust.
At the heart of the financial system lies “trust.” Until now, this trust was provided by banks, regulations, lawmakers, insurance mechanisms, and long-established financial protocols. The blockchain world, however, entered our lives with the claim that trust could be managed not by a person or institution, but by code.
But by 2025, we’re seeing these two approaches start to merge.
🏦 Banks and Protocols Are Starting to Speak the Same Language
One of the most striking developments this week was J.P. Morgan beginning to accept Bitcoin and Ethereum as collateral. This decision marks the first time the traditional banking system has included crypto assets in its credit infrastructure.
In the same week, Aave Labs (one of the first DeFi platforms managing lending and borrowing on blockchain, a decentralized finance platform) introduced the Horizon platform, allowing institutional investors to borrow stablecoins against tokenized Treasury bonds.
So, on one hand, banks are accepting crypto as collateral, while on the other, DeFi protocols are bringing traditional assets onto the chain. Both sides are learning each other’s language.
As Marc Baumann put it when reporting this news:
“While banks are accepting crypto as collateral, DeFi has started accepting the collateral used by banks. The signal is clear: the tracks are converging.”
This development actually reopens the debate on what foundation “trust” is built upon.
🧠 Code or Institution? The biggest advantage of systems centered around code is that they are free from human error and arbitrariness. But that’s also where the biggest risks lie: “Oracle” errors (systems that bring price data from the outside world to the chain), manipulations, smart contract vulnerabilities, or incorrect data flows can bring the system down entirely. So “code” isn’t exactly a perfect source of trust.
Institutions, on the other hand, create trust through strong oversight and regulatory systems, with a whole set of rules and processes. But this trust and process are slow, closed, and often expensive.
J.P. Morgan’s blockchain initiative Onyx is one of the models developed to overcome this dilemma. Banks are trying to integrate the speed and transparency of DeFi into their regulatory environments.
Similarly, projects like Project Guardian, run by the BIS (Bank for International Settlements), are creating hybrid structures where central banks test tokenized assets and stablecoins. These efforts are slowly dissolving the boundary between “institutional trust” and “code-based trust.”
So, in fact, there’s an effort to create an infrastructure that combines the positive aspects of two different worlds; one that has rules, regulations, and processes, but also benefits from the speed, ease, and transparency of technology and code.
🔐 The New Layer of Trust: Code + Institution Trust is no longer just a “feeling” or “reputation,” but a component of infrastructure. Lending, liquidity provision, collateral management, oracle services, identity verification, all converge on this layer.
The actors in this transformation are different:
- Chainlink Labs, a data provider network that securely brings off-chain data onto the blockchain (an “oracle”).
- Circle, the issuer of USDC, the second most widely used stablecoin pegged to the US dollar.
- Coinbase Cloud, a technology platform providing validation and infrastructure services to blockchain networks.
These institutions have become the new representatives of the “trust layer” in decentralized systems. So now, trust isn’t in an institution, but in a protocol. But these protocols are becoming increasingly usable by institutions as well.
💡 Conclusion: Code Hasn’t Completely Replaced Trust, But…
Maybe code hasn’t completely replaced trust. But it has made trust visible, measurable, and auditable. Trust used to be a matter of reputation; now it can be operated and measured by a protocol design, an infrastructure.
“Don’t trust, verify.”
The blockchain world has turned the financial system’s question of “who can we trust” into “what can we verify.” And maybe the biggest change is happening right here: Trust is no longer a feeling, but a layer of infrastructure that is also an engineering layer.