# The Future of Finance: Disintermediating Banking with Morpho

**Podcast:** web3 with a16z crypto
**Published:** 2026-04-08

## Transcript

I think one thing that might hold people back from participating in DeFi is this idea that there is risk involved.
The community has been tricked into thinking that we should build a trustless system to be able to do undercollateralized loans and credits, which is obviously wrong.
The mechanism that we're building is completely crypto agnostic.
It does not have to work with cryptocurrencies, it could work with like any form of tokenized assets in general.
Project for me five to ten years out.
What does the shape of finance look like?
One single database for the entire world.
Paul, thanks for being here.
You're building out Morpho.
Tell us what is Morpho.
What are you doing?
Morpho is an on-chain lending and borrowing infrastructure.
So we allow people on one end to earn yield, and on the other end, people take loans.
And that's done on-chain in an open way.
For somebody who maybe is not into crypto, how would you describe what you're doing?
Crypto is about exchanging money without banks.
And Morpho is about lending and borrowing without banks, right?
There's no intermediary and effectively you can lend and borrow in a much more open without intermediate way.
Okay, so disintermediated banking.
Yes, disintermediate access to loan, like open access to capital in general to like if someone has an ambition and wants to do something and they can prove that they're trustworthy, then they can get a loan without having to rely on like a specific entity.
What misconception do people have about what you're trying to solve?
The biggest misconception about DeFi lending is that the protocols that operate the lending and borrowing engine are in charge of issuing the loans.
And that in the blockchain world, in the trustless world, the lending opportunity should be trustless and should be risk-free.
And for approximately seven, eight years, we've been building lending and borrowing protocols that was were understood as this like fully autonomous engine where the thing was trustless and nothing bad could happen.
Whereas in reality, what we realized building lending and borrowing protocols is that we should have trustless execution of the loans, but the loans themselves, you know, are obviously risky and that you could take losses from them.
As a result, I think the industry have had a very hard time framing how undercollateralized loan could ever exist because you don't have legal recourse.
People could simply run away with the money.
So I think that was like a key realization for us as we were building Morpho.
And that I think still today is not well understood in the crypto native Twitter in general.
Yeah.
I mean, I think one thing that might hold people back from participating in DeFi is this idea that there is risk involved, risk maybe that they don't want to take on.
What would you say to people who have that hang up?
Morphous code is very, very close to the code that you have in the traditional finance like uh system.
I think there is this misconception, like association with like crypto and crypto volatility and prices where people get to lose a lot of money by just like investing and you know losing money due to the volatility.
Whereas the mechanism that we're building is completely crypto agnostic.
Like it does not have to work with cryptocurrencies, it could work with like any form of tokenized assets in general, whether they're stocks, whether they are like the safest like investment products in the world, such as treasuries, civil coins, etc.
etc.
And I think you know, the way one should reason about risk when they get into those products is effectively, yes, you have you know mostly two things.
You have the operational risk, like literally like the code, is it safe?
And you have the market risk, like when I'm the product I'm investing in it, like is the person that is borrowing the fund gonna repay, right?
And those are effectively theoretically can be much better on chain because on the operational risk, you don't have counterparties, it's like executed purely into code, and there is an argument to be made that open source code grows like safer over time because of how many reviews it gets.
And on the market side of things, there's really not much that is different from a traditional loan that you would get, except that again, this time the loan is underwritten in the open, which means that you have maybe much fairer competition to assess the price of the risk you're taking.
Meaning that when some some bar gets underwritten in in the blockchain, you have a lot of lenders competing to give you the best and fairer price, right?
So you're gonna take risk and you're gonna be compensated fairly for the risk you're taking.
Whereas in the traditional finance world, maybe you're taking a bigger risk, but with the financial rewards that's gonna be to a lesser extent, right?
So anyway, so I guess the way one should think about the risk in crypto lending uh versus in Trotfile lending is like through through the similar like risk analysis, but with blockchain technology having the potential to lower those risks in general.
You're having lots of conversations with TradFi institutions.
How much education do they require about DeFi and about what you're building?
A lot.
Uh frankly, but also the good news and surprisingly good news, at least it was a surprise to me, they learn very fast.
Approximately two years ago, like a year ago, we were like spending with like those institutions who were mostly like the research labs, like they were like trying to do a state of the market or like just to inform their leaders to make sure they're not losing anything very important.
But there was no actual like business drive, right?
But as soon as they're started to sense business drive, and this business drive meant like literally like distribution.
Like distribution is coming on-chain.
There's a lot of money on chain that's underserved in terms of yield, in terms of financial products, and they see this as a business opportunity.
And as soon as they realized that, they started pouring in like a lot more resources, and they started learning much faster than what they used to do in the past.
And so the the bad news is we do have to educate pretty much like all Wall Street, right, at the same time.
The good news is that they learn super fast, right?
Hopefully they don't learn too fast, right?
Because we want to preserve an edge for some time and grow alongside them.
That's I'd say the big like surprising like takeaway of the last six months.
Who's been most surprising in terms of their ability to get up to speed so quickly?
And conversely, who are you uh embarrassed about?
I think the way I think about like the the adoption like curve is like wallets, exchanges, fintech, neobanks, asset manager, banks.
Those are like the order by which this sort of like disruption uh order, so like wallets are like the fastest to integrate decentralized finance, and then you have the exchanges, and you see like the Coinbases of the world that start moving on-chain, and they start like removing their servers to like move on chain.
And then you have fintechs that are like, oh, like you know, all this like crypto technology could effectively make me my financial services much better, and so they're following the move that Coinbase is doing.
And the neo banks are kind of like in the middle, slower than FinTechs, but they they're they're still quite tech native companies, so they move fast.
Which leaves us with the two tratfy pillars, which are like the asset managers and the banks.
I'm impressed by asset managers, I'm embarrassed by banks in general.
There are exceptions in both cases, right?
But asset managers have definitely been like the fastest to execute.
And you're working with Apollo?
Yeah, the Apollo's of the world.
Like Apple is has been particularly impressive by how fast they've been moving.
But you know, other asset managers have been great as well, like you know, like the Fidelity team that uh the BlackRock team, obviously, and and and a bunch of others.
But I will say Apollo has been specifically like very, very impressive.
And from there, you have the banks, right?
And the banks, they have to obey to a much like you know more important set of regulation, at least for this specific type of activities, which really prevents them from like moving as fast.
And they're still in the paradigm where when you get to talk to them, they take a lot from you.
Uh, but they don't give back as much, right?
It's not entirely true for all the banks, right?
We have some excess, surprising, but it's in in Europe and France, we have like the largest like banking adoption, where like they're launching stable coins and they're launching their Morpho Vault.
And we have, for example, the SockGen in France announced that they're moving progressively their loan books on Morpho, which I was not hoping to get like a year ago, right?
And and it's been very impressive, and it's getting a ton of trustomers.
Is that just because they like you?
You're French, so you guys hang it off?
Yeah, I'm sure like the French you know vibe helps.
Like uh, you know, like our office is not so far away.
Like they come to our office, we go to their office like every now and then.
So that surely helps.
Proximity helps.
Also, I will say that SOCGen is probably by far the most like forward-thinking bank on crypto in the world.
They were like issuing on-chain loans like three years ago.
Yeah.
They have their own stable coins.
And in general, like European banking is waking up, especially as they don't see any euro stablecoin like really taking off.
And you know, some could argue Circle is doing a good job with URC, which is true, but it's nowhere close to the state of adoption that USDC has.
No.
There's a massive gap and opportunity to take like you know, the crown of the Eurosablecoin, especially if you're European native.
Like it's it's very hard for Circle as a US-based company to like claim that that crown, even though I think they're doing a good job.
99% of stable coins are denominated in USD.
Do you think there is an opportunity for a Euro coin?
Can it exist and compete in that environment?
There are a lot of people that get paid in Euros, right?
And so that reason alone should make it a big enough opportunity for you know settling and paying and storing value in euro.
I'm interested in a euro stable coin that yields, right?
Like I get paid in Euros.
And right now, like it's widely underserved in DeFi.
Hopefully it was more for we've widely adopted Euro stablecoin much more.
It's been a big thing.
And you know, maybe also like those Euro stable coins, you know, frankly, I see free path for them.
Like either they come like from a big fintech or a big bank, slash exchange, uh, a big bank, or they come from Circle.
I think it's gonna be like one of the three.
Not sure what the central bank is up to these days with the Eurosable coin as well.
They had plans, it changed a lot.
So okay, so project for me five to ten years out.
What does the shape of finance look like?
What does the landscape look like?
I didn't have a financial background, I had a computer science background when I started in DeFi.
And so what I learned about finance over the last four years of like, you know, talking to all the largest financial institutions of the world, all the payment company, et cetera.
And as I was building from scratch and first principle, I had like zero bias about how to build a financial service myself.
We built this as out of pure intuition of like what a financial service should be.
This experience essentially taught me one thing about finance, that finance is like essentially 50,000 different banks and credit unions that all have segregated infrastructure, like literally servers and databases that are segregated.
And they don't trust each other very well.
They don't you know connect very well with one another, and effectively the entire inefficiency of the financial system comes from the fact that you have 50,000 databases that are asynchronously updating each other, that don't trust each other and requires an enormous amount of middlemen that effectively update the values and the entries from one place to the other, and you pay like 25 different intermediaries in order to connect one database to the other.
You don't even know what database exists, so you need a payment network to connect the different banks, and you have to make like the information secure, et cetera.
And when you look at this, you're like, wow, like that's a huge mess, right?
And then you have Ethereum on the other hand, which is like one single database for the entire world, like one single computer for the entire world.
Where you don't get to have this mess of like updating the different entries and having different trust levels and all this like complex web of intermediaries.
And so I can't help thinking of like painting a much cleaner picture of finance where first we're all operating in the same computer.
So there is no need for the middleman to update, quote unquote, the unupdated like databases and communication.
So that's the first thing.
The second thing is that the system is open, meaning that the competition is operating in a truly genuinely fair like uh fashion, which means that for the first time ever, you're gonna have the value that has been concentrated in those inefficiencies that's gonna be pushed to the to the edges of the network.
Like the consumer is gonna benefit immensely because whatever financial product that they used to have in a closed fashion is gonna be superpowered by the open blockchain.
The reason being that when the system is open, uh you get to bag much more liquidity and aggregate much more intents from the entire world.
So we were thinking about loans, but when you're gonna ask for like a mortgage, instead of going to a specific bank, you're gonna come to the open blockchain, it's gonna say, hey, here's why I should be trusted.
And then you're gonna have the entire world quote you on your interest rate and say, hey, we'll give you three percent, and maybe GP Morgan is gonna say 2.8, and maybe a random student in Argentina is gonna have his own quant model and it's gonna underwrite you.
And it's gonna be like this massively competitive open network where anyone gets to participate and anyone gets appreciated by their own fair value and and their fair like credit worthiness.
And so, you know, fundamentally, I don't think like we're gonna have like no new crazy like financial primitives, like the financial primitives are you know gonna roughly be the same.
Like, you know, you're gonna have options, you're gonna have obligations, and you're gonna have trading.
The main difference is that because of how open the system is, it's gonna be widely more efficient.
So the prices, the take rates are gonna go down widely.
So that's one.
The second is like the integrability being so easy, it would be much easier to get access to financial products in general, just because technologically it's super easy to integrate into a single database as opposed to integrate with like 50,000, right?
And both in terms of like moving from zero access to an access to financial services, but also in terms of like having a much deeper and broader access to diversified like financial primitives and also much more personalized.
So, really frankly, like efficiency and like much lower take rates, uh, much broader access to a much wider set of financial services that are much more personalized, are like the key main differences when you run finance on chain.
It's a compelling vision for the future.
Yeah.
Lightning round.
All right.
Worst piece of advice you've received as a founder.
Join an incubator.
Yeah, I guess.
Or wait, like I I got some investors telling me like, hey, you should finish school before like starting Marvel or like before talking to us.
Obviously, that wasn't you guys.
Probably I would be very surprised.
You didn't even ask if I was a student, you just invested.
You didn't know I was a student, by the way, I never told you.
But not into the credential.
What book would you recommend people read?
Read right own?
Fantastic.
I love this answer.
It's awesome.
Like I mean, I I Chris Dixon's book.
Yeah, I fantastic.
Like, it truly is.
It truly is a very good book.
Like uh and that's the only right answer.
I really mean it.
Like we were lacking one like one single book where you get like some like true like crypto wisdom and like real web-free wisdom, like not just like the crypto trading aspect, but like really the computer science aspect and like what effectively this world like industry brings to the world.
Biggest productivity hack?
The thing about productivity is like it's the sum of tiny things that you optimize here and there.
I think for me, like one of the latest thing I learned is like this Slack feature where you can do like the catch-up messages.
I don't know if you see that.
It's only available on the phone, unfortunately.
But for whatever reason, you catch up so much faster with this like feature, which I I find insane.
And you can sort of like swipe left and right, like mark on red, mark red.
But here is a good one.
Like when I walk from one place to another, I turn on like ChatGPT voice and I ask it like a bunch of questions of things I don't understand, right?
So typically I'm in a TratFi call, like you know, with an asset manager, they throw out a bunch of terms I don't understand, and I pretend I do, and I'm like, yeah, and I just write them on my to-do list.
And then from my to-do list, like when I walk from some place to another, I talk to ChatGPT and I ask it, like, hey, can you explain to me about this term or about this thing?
And then you go very deep when you walk, and that's like a very nice way of making walks productive when you go from one place to another.
That's amazing.
That's like the uh the cluely premise of cheating on everything.
Yeah.
The AI company.
Final question.
Smallest hill you'll die on.
Yeah, probably something wrong preserving the French culture.
Which aspect of the French culture?
Food, probably.
Butter croissants or other types.
Okay.
I think butter croissants is a perfect example.
I in New York, I paid like eight dollars my uh pan chocolat, uh, which to me is insane.
Like it was not even close to be as good as like your random French bakery.
So see, I think that would be like a good one.
And in France, it's like one dollar.
I recently learned that the shape of a croissant dictates the ingredients that were in there.
There's like actually a French law where straight croissants are made of butter and curved ones can be made with other oils.
This is actually a very important distinction.
I don't know if they follow it in America, but no, it it's very important if you don't have transparency in the bakery and you end up buying like industrial croissants, like you need transparency spoken like a true DeFi advocate.
Yeah, croissants, transparency.
Yes.
All right.
Thank you so much, Paul.
Thank you.