Tether, Galaxy Digital, and Ledn Lead Centralized Crypto Lending Amidst a Boom in DeFi Borrowing

The crypto lending sector is undergoing a dynamic transformation, as centralized finance (CeFi) institutions—most notably Tether, Galaxy Digital, and Ledn—continue to dominate lending volumes, even as decentralized finance (DeFi) borrowing surges to new highs. Recent data suggests that while DeFi protocols are rapidly gaining traction among retail users and crypto-native participants, centralized lenders still command the lion’s share of institutional trust, regulatory structure, and capital efficiency.

CeFi: The Institutional Pillar of Crypto Lending

Tether has emerged as the unequivocal heavyweight in the CeFi lending space, responsible for approximately 73% of all centralized crypto loans as of late 2024. According to recent disclosures, Tether’s reserves now include over $8.2 billion in secured loans, which are collateralized by high-quality digital assets. The company has positioned its lending operation as a strategic use of its stablecoin (USDT) reserves, allowing it to earn yield while maintaining significant collateral backing.

Despite some historical controversies around reserve transparency, Tether’s scale and liquidity make it a preferred counterparty for large borrowers. Its lending book is often oriented toward short-term, overcollateralized loans, mitigating credit risk while supporting ecosystem liquidity—particularly during periods of market volatility when other lenders may reduce exposure.

Galaxy Digital, meanwhile, occupies a more traditional financial niche, bridging institutional investors and crypto markets. Its lending arm benefits from extensive over-the-counter (OTC) operations and a diversified financial service model that includes asset management, trading, and investment banking. With a strong regulatory posture and institutional relationships, Galaxy has become a key conduit for Wall Street firms looking to access digital asset lending in a compliant, secure manner.

Ledn stands out for its focus on transparency and innovation. In 2024 alone, Ledn processed more than $1.16 billion in digital asset loans, making it one of the fastest-growing CeFi lenders globally. The company’s proof-of-reserves attestations—audited quarterly—have set a standard for transparency in a space often criticized for opaqueness. Beyond traditional lending, Ledn has also pioneered Bitcoin-backed mortgage products, which allow users to finance real estate purchases without liquidating their crypto holdings. This positions Ledn not just as a lender, but as a financial bridge between digital and real-world assets.

DeFi: Permissionless Lending on the Rise

While CeFi lenders hold strong in terms of volume and institutional presence, DeFi lending protocols have seen exponential growth in user activity, total value locked (TVL), and innovation. Platforms like Aave, Compound, MakerDAO, and newer entrants such as Spark or Morpho provide decentralized alternatives to CeFi, enabling peer-to-peer lending via smart contracts.

DeFi borrowing is particularly attractive in emerging markets and among crypto-native users who value decentralization, privacy, and autonomy. Users can borrow instantly without needing to undergo KYC, and interest rates are governed by algorithmic supply-demand dynamics. This model has proven resilient even during volatile market conditions, especially as major protocols have strengthened their risk frameworks through mechanisms like dynamic collateral factors, liquidation bots, and governance-led upgrades.

Moreover, DeFi platforms are pushing the boundaries of capital efficiency. Protocols like Aave V3 introduce “high-efficiency mode,” while newer designs like Morpho attempt to combine peer-to-pool and peer-to-peer models to reduce spread between borrowers and lenders. However, DeFi is not without its risks—smart contract bugs, oracle manipulation, and governance attacks remain persistent vulnerabilities.

CeFi vs. DeFi: Divergent Models, Complementary Growth

The divergence between CeFi and DeFi reflects broader themes in financial services: trust vs. autonomy, regulation vs. decentralization, and institutional vs. retail adoption. CeFi platforms are ideal for institutions and high-net-worth individuals who prioritize security, compliance, and high-liquidity loans. In contrast, DeFi caters to the long tail of users seeking borderless access, composability, and programmatic control.

The Future: Convergence or Coexistence?

The latest data suggests that CeFi and DeFi are not in direct competition, but rather evolving in parallel, serving different user segments. CeFi’s dominance in terms of capital inflow and underwriting capacity isn’t likely to be challenged in the short term, particularly as players like Tether and Galaxy scale further. However, DeFi continues to innovate at an unprecedented pace, and its user base is growing fast, especially in jurisdictions with limited access to traditional financial services.

What’s emerging is a hybrid financial system—CeDeFi, as some call it—where the strengths of both models may ultimately converge. For example, Ledn’s proof-of-reserve methodology borrows from DeFi’s ethos of transparency, while some DeFi protocols now offer KYC-enabled “permissioned pools” for institutions.

In sum, the crypto lending sector is maturing, marked by the coexistence of robust centralized lenders and agile decentralized protocols. While CeFi giants like Tether, Galaxy, and Ledn maintain their leadership, DeFi’s rise signals a future where users increasingly have the power to choose the financial paradigm that best fits their needs—centralized trust, decentralized autonomy, or a blend of both.