DeFi or decentralized finance can threaten the world of traditional banking, because of the shift in lending, even DeFi itself is known to be able to provide loans like other traditional banks.
This can affect existing traditional banks, because there will be competition between traditional banks and crypto in general, regardless of the various problems that will occur, crypto and traditional banks must be able to adapt to each other.
I do not think DeFi is a threat to traditional banking, Defi can be banned if the banking institution forbids it to operate within their jurisdiction.
Crypto development is progressing so rapidly, this can be seen from the many users who join here, if Traditional Banks close themselves it is not impossible to be abandoned in the next few years.
Although currently crypto is still very risky, it is not impossible that in the future crypto can change finances, just need to wait for regulations or legal regulations, if this happens, it is certain that crypto will grow and be accepted by many people.
We don't need to wait for the future to see the effect of cryptocurrency to the bank system. Actually, Cryptocurrency is already shaping the financial system. Banks and financial institutions may deny it but their action speaks louder than their denial. Just check how they wanted to implement CBDCs. If it is not for crypto they would have not been pressured to that extent.