One worry is the lack of an external anchor of value. Cryptocurrencies are no different from the dollar, in that they rely on people having a shared expectation of their utility. However, conventional money is also backed by states with a monopoly on force and central banks that are lenders of last resort. Without these, DeFi will be vulnerable to panics. Contract enforcement outside the virtual world is also a concern. A blockchain contract may say you own a house but only the police can enforce an eviction.
Digital libertarians would prefer that DeFi remain autonomous—imperfect but pure. Yet to succeed it must integrate with the conventional financial and legal systems...