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TradFi (traditional finance) refers to the established financial system comprising banks, stock exchanges, insurance companies, and investment firms operating under centralized regulation. Core institutions include commercial and investment banks, central banks like the Federal Reserve, asset managers, and payment processors. TradFi is characterized by centralized intermediaries, strict regulatory compliance (KYC/AML), consumer protection, and established infrastructure. Unlike decentralized finance (DeFi), which uses blockchain and smart contracts for peer-to-peer transactions, TradFi relies on trusted institutions and legal frameworks. The future likely involves convergence, with traditional institutions adopting blockchain technology while maintaining regulatory oversight.
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