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Decentralised Finance (DeFi) offers institutional investors higher yields and 24/7 markets — but with significant risks. This guide covers the opportunities, dangers, and how to enter DeFi safely.
Opportunities
- Yield: 3–15% APY on stablecoins (vs 1–2% traditional deposits)
- 24/7 markets: No banking hours, instant settlement
- Transparency: All transactions on-chain, fully auditable
Risks
- Smart contract bugs: £2B+ lost to hacks in 2024–25
- Regulatory uncertainty: FCA unclear on DeFi treatment
- Liquidity risk: Can be difficult to exit large positions
Recommendation: Start small (£100k–500k), use only audited protocols (Aave, Compound, MakerDAO), and never allocate more than 5% of AUM to DeFi.
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Sento earns a referral if you click through our links — this never affects our recommendations. Prices and details correct at time of publication. Updated February 2026.