Innovations and Challenges in DeFi Adoption: The Role of Digital Literacy, Risk and Regulation in Urban Banking

DOI

10.2991/978-94-6239-772-9_42How to use a DOI?

Keywords

Decentralized Finance; Urban Banking; Digital Literacy; Technological Risk; Regulation; Financial Technology

Abstract

Decentralized Finance (DeFi) is emerging as a disruptive financial innovation that leverages blockchain technology, smart contracts, and decentralized platforms to deliver financial services without reliance on traditional intermediaries. In the urban banking ecosystem, DeFi offers opportunities such as decentralized lending, asset tokenization, decentralized exchanges, and improved financial access. However, the adoption of DeFi in urban banking environments remains constrained by several highly interlinked socio-technical challenges. This paper aims to address critical gaps in fintech literature by establishing an integrated conceptual framework grounded in the Unified Theory of Acceptance and Use of Technology (UTAUT). The paper systematically examines the determinants that shape DeFi adoption, with a dedicated emphasis on digital financial literacy, technological risk, and regulatory environment. The conceptual framework demonstrates that limited digital awareness, cybersecurity vulnerabilities, algorithmic smart contract failures, structural volatility, and ambiguous legal parameters collectively diminish institutional and retail trust, the reason for delay in mainstream integration. By analyzing the complex, non-linear interactions between these variables, this paper provides strategic pathways for designing inclusive, secure, and resilient DeFi ecosystems in urban environments. To conclude, sustainable adoption depends on targeted literacy initiatives, advanced risk-mitigation frameworks, and co-regulatory sandboxes that balance financial innovation with rigorous consumer protection.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Pravalika Paul
PY  - 2026
DA  - 2026/09/07
TI  - Innovations and Challenges in DeFi Adoption: The Role of Digital Literacy, Risk and Regulation in Urban Banking
BT  - Proceedings of the 2nd International Conference on Innovations and Challenges in Financial Technology (ICICFT 2025)
PB  - Atlantis Press
SP  - 585
EP  - 595
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-772-9_42
DO  - 10.2991/978-94-6239-772-9_42
ID  - Paul2026
ER  -