DECENTRALIZED FINANCE ADOPTION AND BANKING DISINTERMEDIATION IN EMERGING DIGITAL ECONOMIES

Abstract

This study investigates how decentralized finance adoption reshaped banking intermediation structures across emerging digital economies during the foundational digital finance expansion period between 2005 and 2014 by evaluating the conditional role of financial technology environments in accelerating institutional financial transformation. Using a balanced panel dataset of 1,760 institutional year observations constructed from harmonized global digital finance repositories, the study applies fixed effects panel regression, interaction-based moderation estimation, heteroskedasticity robust clustered inference, and multidimensional composite index modeling to estimate the structural relationship between decentralized finance adoption and banking disintermediation. The findings reveal that decentralized finance adoption exerted a strong positive and statistically significant effect on banking disintermediation, with blockchain technology integration and digital financial accessibility producing the largest structural effects on non-bank financial participation and intermediary transaction displacement. The results further demonstrate that supportive financial technology environments amplified decentralized finance driven transformation through enhanced digital infrastructure readiness, cybersecurity preparedness, and institutional adaptability. Interaction estimates remained robust across alternative specifications, lagged estimations, and sensitivity diagnostics, confirming stable ecosystem conditioning effects across heterogeneous institutional environments. The study extends financial innovation and institutional transformation theories by integrating utilization, infrastructure, accessibility, and governance systems within a unified decentralized finance architecture. The findings provide globally relevant policy guidance for regulators and digital finance institutions seeking to balance financial innovation, inclusion, and banking system stability within emerging digital economies.