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Decentralized finance is not just an ideological clash or speculation: it is a technological frontier that is already transforming production chains and global markets. From food traceability to commodity management, blockchain and tokenization promise greater transparency, fewer conflicts, and more efficient exchanges. In an uncertain geopolitical context, innovation is not an option but a necessity. And Europe—its institutions and businesses—is called upon to decide whether to lead this transition or follow it.

The new world of DeFi

Over the last two years, the debate on crypto-assets and the underlying technology has taken on decidedly Manichean tones, driven in part by important regulatory developments: first and foremost, the US SEC’s approval of ETFs with Bitcoin (BTC) and similar assets as their underlying assets; followed by various measures taken by the Trump administration (e.g., the GENIUS Act). Today, we are still witnessing an ideological clash between opposing factions, with little attention paid to the practical applications of this ‘alternative’ financial segment and — perhaps even more importantly — the technological infrastructure that supports it.

The scope of “tokenization” — which has received new momentum from the enactment of a dedicated regulation (DLT Pilot Regime, implemented with the “Fintech Decree” in spring 2023) — has taken distributed ledgers well beyond the “simple” (so to speak) minting and exchange of crypto-assets. Although the debate continues to be very heated and the latest data show a certain divergence between the two activities, Bitcoin has often been labeled “digital gold,” even in light of the interest shown by some central banks in establishing crypto reserves (currently small in size and outside the Eurosystem).

The role of blockchain: quality certificates and commodity markets

In light of these changes, it is important to ask: what relationship can there be between “decentralized finance” (DeFi) on the one hand and the agri-food sector on the other? The connections may remain little known, but they are numerous. First, because of the importance of quality, traceability, and supply chain certification: elements that blockchain can easily guarantee, precisely because of the way it is designed. Secondly, because tokenization can boost commodity trading, which is by far the most important asset class for the agri-food supply chain. The latter, moreover, undoubtedly benefits from a technology that can facilitate the orderly and accurate exchange of information, thereby reducing trade conflicts between nations. The result could be to facilitate the conclusion of international treaties, which, although beneficial to both parties, often encounter hostility from those who object to the difficult compatibility between systems with different rules, e.g., on product quality standards.

The use of blockchain, on the other hand, not only brings greater cybersecurity, ensuring the integrity and inalterability of content, but is also useful in the fight against fraud and adulteration, as well as for the correct attribution of “geographical indications” (just think of its usefulness in combating the long-standing problem of Italian sounding).

Why the sector need finance (now more than ever)

These are now well-known applications, on which the global agri-food market is making significant progress (which deserves to be accelerated). The next step, however, concerns the efficient management of commodities: e.g., in warehouse storage, as well as in the valuation of physical “collateral” posted as security for contracts or used as a constituent element thereof (e.g., for forwards and futures).

Agricultural commodities have always been more “financial” in nature than, for example, metals: their intrinsic quality is much more variable; their availability is influenced not only by well-known geopolitical dynamics, but also by potentially disruptive climatic factors. Hence the need for companies in the supply chain to sign large volumes of contracts to “hedge” supply risks (and, therefore, price fluctuations). Equipping them with automated procedures that accurately record their characteristics according to a precise time stamp is exactly what any economic operator would want, as it could perhaps mitigate the negative effects of regulatory arbitrariness: think of the ambiguous and sudden decisions that various countries around the world have taken with regard to palm oil.

Existing applications: the TRACES systems

Furthermore, these markets date back to the dawn of modern capitalism: it was precisely the “securitization” of agri-food trade that supported the transformation of the system from rural to industrial to service-oriented. Today, the supply chain is called upon to embrace DeFi tools: first and foremost, smart contracts, which are automatically executed via blockchain. On the one hand, this could reduce disputes; on the other, its practical functioning depends on external data—inspections, certifications, signatories’ identities—being properly verified. A dedicated EU structure, operating on foreign trade, already exists; it is called TRACES and aims to “streamline the certification process and all related procedures, offering a fully digitized workflow.” In 2024, according to the Commission, TRACES handled over 5.4 million documents, with over 100,000 users worldwide, including public and private entities, and 90 countries involved (in the Union’s import/export).

A collective challenge for: public administration, the production system, and institutions

Ultimately, blockchain is called upon to facilitate interactions between private individuals or between them and public administration, proving useful where the latter still tends to think in silos, without databases “talking” to each other and, therefore, without being able to make data the true “oil” of modernity. There is no shortage of possible use cases: from the information requirements of the Deforestation Regulation (EUDR) to the new rules on geographical indications, which are in turn strategic for the functioning of certain international agreements (such as the one with Mercosur, in which agri-food plays a dominant role). In an increasingly uncertain global context, moving towards the ‘frontier’ of innovation is imperative: even more than the institutions in Brussels, it is the European production system that must not be left behind.

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