Aave has emerged as a top DeFi protocol with $1.5B locked in its smart contracts. It has also become the first DeFi project to reach a $1B market cap and receive an Electronic Money Institution license from the United Kingdom Financial Conduct Authority.
Aave recently launched its Aavenomics proposal to reward both liquidity providers and AAVE holders who are taking part in the risk position and keeping the protocol safe. Stani Kulechov, the CEO of Aave, told Cointelegraph in a phone call that the function that allows Aave token holders to stake into the Safety Model is reportedly to attract more institutional investors and the general public to deposit into Aave.
The goal of the Aavenomics is to create a Shelling Point where the protocol’s growth, sustainability and safety take priority over individual stakeholder objectives. Kulechov explained that:
“One of the AAVE token functions allows holders to stake into a Safety Model and provide safety for those depositors.”
The Safety Model is a staking mechanism to secure AAVE tokens to act as an insurance against Shortfall Events. Financial incentives will focus on those stakers who are taking the most risk positions, says the founder.
To make the Aave protocol governance more decentralized, the project will migrate the original LEND token to AAVE. It will go through a Genesis Governance vote at a proposed rate of 100 LEND per 1 AAVE. The governance is said to either accept the proposed rate or not in the coming weeks.
The total supply of AAVE will be 16 million tokens. Thirteen million AAVE tokens will be redeemed by LEND. This means the supply of the Aave token will be less compared LEND. The reason is more of a technical upgrade than anything, according to Kulechov. A new mint AAVE function is added for “protocol security.” He explained that:
“If there is a smart contract bug, or there is a failed liquidation or some sort of an event that there is a deficit into the protocol, minting more AAVE is said to save protocol deficit.”
A reserve of 3 million Aave token has been set aside to incentivize protocol developers in the future. He says:
“If someone is building some interesting functionality for the protocol, this reserve can be utilized to support those kinds of actions.”
Kulechov stressed that the interoperability of protocols in Ethereum’s DeFi ecosystem is critical for making the current DeFi market evaluation possible. He added that:
“The key factor for the substantial growth in the DeFi space depends on an infrastructure where developers can use one or two baseline protocols and build other protocols on top of them.”
He said the projects being built are experimental in nature, with DeFi providing a playground for developers and users. DeFi’s ultimate goal, according to Kulechov is to remove the inefficiencies of traditional finance and provide a permissionless infrastructure that allows people to access the financial system without any barriers.
Kulechov pointed out that currently, there are about 30 different access points for users to access the Aave protocol. Crypto wallets allow people to utilize the protocol and deposit stablecoins and other funds to earn interest.
The permissionless system is also a key factor for cryptocurrency mass adoption. The founder explained that being permissionless means anyone and everyone can build functionality into DeFi:
“Any developer from different parts of the globe can build a new financial or non financial application that uses Aave anywhere and anytime because our protocol is accessible to developers and that’s an important factor for adoption.”
Kulechov sees DeFi protocols will run themselves permissionlessly to execute smart contracts. Regulations in the future will focus on the process of creating smart contracts and ensuring the smart contracts are secure enough to implement in the mainnet.
“DeFi is like the ocean where the ocean is not regulated but the ports such as smart contracts that lead to the ocean should be regulated.”
SpaceX owns BTC, daily Dogecoin volume surged in Q2, Grayscale eyeing ETF: Hodler’s Digest, July 18–24
Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.
Top Stories This Week
SpaceX owns Bitcoin, Elon Musk and Nic Carter believe BTC is becoming greener
Elon Musk, Dogecoin (DOGE) proponent and fair-weather friend to Bitcoin (BTC), revealed for the first time on July 21 that his aerospace firm SpaceX owns an undisclosed amount of Bitcoin.
“I do own Bitcoin; Tesla owns Bitcoin; SpaceX owns Bitcoin,” he said.
Musk was speaking at “The ₿ Word” — a virtual event dedicated to Bitcoin — alongside Twitter CEO Jack Dorsey and Ark Invest CEO Cathie Wood, and the erratic tech billionaire suggested Tesla was on the verge of accepting the cryptocurrency again following promising signs that the percentage of renewable energy used for mining was increasing.
Tesla’s $1.5 billion foray into Bitcoin earlier this year sparked a major BTC price rally. However, Tesla’s suspension of Bitcoin as a payment method over environmental concerns in May appeared to tank the price of Bitcoin, with BTC crashing around 40% over the past two months.
Now that there is a diminishing Chinese coal-powered hash rate after the mining ban, it appears that Musk is warming up to digital gold again. Musk has stated that, after he does a bit more “due diligence” on mining sustainability and can confirm it’s backed by 50% renewables or more, Tesla may re-enter the market.
One wonders what said due diligence this entails, and why he didn’t do it before the $1.5 billion Tesla BTC buy.
Musk also revealed, for the first time, that he holds Ethereum (ETH), and unsurprisingly reaffirmed his support for the meme-inspired Dogecoin.
“I do personally own a bit of Ethereum, and Dogecoin of course,” he said.
Daily Dogecoin volume soared to nearly $1B during Q2
Speaking of Musk’s favorite cryptocurrency, trading volume for Dogecoin increased by more than 13 times during the second quarter of 2021, nearly tagging $1 billion daily.
According to data compiled by Coinbase and reported by Business Insider, Dogecoin trading volumes soared 1,250% between April and June, with $995 million worth of DOGE changing hands daily on average during the quarter.
By comparison, Dogecoin’s average daily volume for the first quarter of 2021 was $74 million.
While those figures are sure to spark hype among the fiery-eyed Dogecoin community, the subject of the top canine coin may be a touchy one for Coinbase.
A Coinbase user has filed a class-action lawsuit seeking $5 million in damages because of an allegedly misleading Dogecoin campaign.
According to court documents, plaintiff David Suski said he was deceived into trading $100 of Dogecoin for entry into a $1.2 million sweepstakes offer on Coinbase. The lawsuit asserts that Coinbase failed to communicate that a person could enter the sweepstakes without purchasing $100 of Dogecoin.
Ethereum must innovate beyond just DApps for DeFi degens: Vitalik Buterin
Ethereum co-founder and lead developer Vitalik Buterin has urged the Ethereum community to innovate beyond the confines of decentralized finance, or DeFi.
Buterin was speaking during his keynote at the Ethereum Community Conference in Paris on July 21, and described non-financial utilities as “the most interesting part of the vision of general-purpose blockchains.”
The 27-year-old outlined several non-financial applications for Ethereum, including decentralized social media, identity verification and attestation, and retroactive public goods funding.
The Ethereum co-founder has had a busy week, and after speaking at the Ethereum conference, he also surfaced in Ashton Kutcher’s and Mila Kunis’ living room. He wasn’t trespassing of course, and was there as part of the promotion for Kunis’ NFT project dubbed “Stoner Cats.”
Buterin launched into a lengthy explanation of Ethereum’s fundamental components and articulated how the smart contract protocol differs from “single-purpose” chains such as Bitcoin.
Grayscale sets sights on institutional DeFi fund
While Buterin is looking beyond the decentralized bounds of finance, digital asset management giant Grayscale is looking to gain exposure in the sector.
On July 19, Michael Sonnenshein, CEO of Grayscale, announced a new investment vehicle aimed at DeFi assets.
In an interview with CNBC’s Squawk Box, the CEO chimed in to announce Grayscale’s plans for a DeFi Fund and index. Detailing the purpose of the new product, the Grayscale CEO said the fund would offer exposure to DeFi assets, such as Uniswap and Aave, for its institutional clients.
During the same week, Sonnenshein stated he thinks that only a “couple of maturation points” separate the United States from its first Bitcoin exchange-traded fund, or ETF.
After many rejections of BTC ETFs in the past, along with 13 ETF applications under consideration, Sonnenshein is undeterred and said the firm is “100% committed” to transforming its Bitcoin product, the Grayscale Bitcoin Trust, into an ETF once conditions are right.
US lawmakers don’t want Olympic athletes to use digital yuan at 2022 games
Despite the majority of Japanese citizens reportedly wanting the Olympics canceled over pandemic-related concerns, the event is going ahead.
The U.S. government has already got its eyes on the 2022 Winter Olympics in Beijing, however, and three U.S senators signed a letter urging Olympic officials to forbid American athletes from using the digital yuan during the upcoming event earlier this week.
In a July 19 letter to the U.S. Olympic and Paralympic Committee board chair Susanne Lyons, Republican Senators Marsha Blackburn, Roger Wicker and Cynthia Lummis, also a BTC proponent, requested that officials prevent U.S. athletes from using or accepting the digital yuan.
The senators asserted that the athletes’ use of the central bank digital currency can be “tracked and traced” by the People’s Bank of China.
The senators stated that the Chinese government recently rolled out new features for the digital yuan, giving officials the ability “to know the exact details of what someone purchased and where.”
If Olympic officials approve of the request, China will, unfortunately, have to deploy other methods to track and trace the U.S. athletes that do enter the country.
Winners and Losers
At the end of the week, Bitcoin is at $32,580, Ether at $2,070 and XRP at $0.60. The total market cap is at $1.35 trillion, based on CoinMarketCap data.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Telcoin (TEL) at 26.82%, SushiSwap (SUSHI) at 26.17%, and Axie Infinity (AXS) at 23.12%.
The top three altcoin losers of the week are Mdex (MDX) at -25.55%, THORChain (RUNE) at -18.98%, and Theta (XDC) at -11.26%.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
Most Memorable Quotations
“I might pump, but I don’t dump. I definitely do not believe in getting the price high and selling it or anything like that.”
Elon Musk, Tesla CEO
“Moving beyond DeFi is not about being against DeFi. I actually think […] the most interesting Ethereum applications are going to combine elements of finance and non-finance.”
Vitalik Buterin, Ethereum co-founder
“Neither USDC nor Tether is a regulated digital asset, for the simple reason that neither token has a regulator. In fact, neither USDC nor Tether tokens are ‘stablecoins’ in anything other than name.”
Paxos, stablecoin provider
“I think that digital art is probably going to last a lot longer than galleries. I mean, you probably won’t be going into galleries. We’ll be sitting in bars showing each other what we’ve recently bought on our phones, and that’s kind of what we do now.”
Damien Hirst, world-renowned contemporary artist
“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime.”
Gary Gensler, SEC Chair
“More than ever, we need to take advantage and harness the potential of these new technologies to ensure that we are better equipped and more united in the future, in order to make our planet a more livable, equitable place for all.”
Irakli Beridze, head of the Centre for Artificial Intelligence and Robotics at the United Nations Interregional Crime and Justice Research Institute
“If a Bitcoin ETF is coming through the Gensler administration, my view is it’s not going to happen this year. […] There’s also been quite a bit of sort of a body of language and rhetoric and points that have been made by the staff with previous applications that need to be addressed. And so this isn’t a slam dunk.”
Greg King, CEO of Osprey Funds
“Recent calls to establish a more appropriate standard for technologically complex digital assets have turned into a firestorm since the Ripple case was filed. Some tech policy experts closely following the case have called for a ‘Ripple Test’ to replace Howey.”
George Nethercutt Jr., former member of U.S. Congress
Prediction of the Week
$13K Bitcoin price predictions emerge with BTC falling below historic trendline
Ever since the crypto downturn began around May 12, the bears have been on parade as they forecast doom and gloom for the future price of BTC.
This week, Cointelegraph reported that a pseudonymous chartist who goes by the name “Bitcoin Master” shared concerns about Bitcoin’s potential to undergo an 80% average price decline upon breaking bearish on its 50-day simple moving average (SMA). The analyst noted that if the said fractal plays out, BTC/USD exchange rates could crash to as low as $13,000.
The 50-week SMA represents the average price traders have paid for Bitcoin over the past 50 weeks. Over the years, and in 2020, its invalidation as price floor has contributed to pushing the Bitcoin market into severe bearish cycles.
However, previous market cycles haven’t been impacted by Elon Musk’s inclination to cause mayhem in crypto through his tweets, so we may see a 50-week Musk tweeting average become the accepted method for BTC price predictions in the future.
FUD of the Week
SEC Chairman says cryptocurrency falls under security-based swaps rules
The United States Securities and Exchange Commission, or SEC, may soon issue new rules for the regulation and registration of security-based swaps, including cryptocurrency.
In a speech to the American Bar Association Derivatives and Futures Law Committee, SEC Chairman Gary Gensler outlined that, from November, new requirements will go into effect, which include internal risk management, supervision and chief compliance officers, trade acknowledgment and confirmation, and recordkeeping and reporting procedures, to name a few.
“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These platforms — whether in the decentralized or centralized finance space — are implicated by the securities laws and must work within our securities regime,” Gensler said.
Auditors reveal USDC backing as Jim Cramer sounds alarm over Tether’s mad money
Speaking during a July 20 interview with TheStreet, Jim Cramer, the host of CNBC’s Mad Money, questioned Tether’s lack of transparency and asked why the firm hasn’t disclosed the composition of its commercial paper, which accounts for a large percentage of its holdings.
Tether’s brief reserve breakdown in May showed that, as of March 31, three-quarters of its reserves were held in cash, cash equivalents, other short-term deposits and commercial paper. Within that category, commercial paper accounted for 65.39%, with cash alone accounting for just 3.87%.
“I am concerned about Tether, and I’m not gonna stop sounding the alarm until I know what Tether has. They’ve got about $60 billion in commercial paper. Tether, open up the kimono, what commercial paper do you own?” Cramer said.
Crypto is an ‘untested asset category,’ says UBS CEO Ralph Hamers
Ralph Hamers, CEO of Swiss bank UBS, said on July 20 that he does not fear missing out on crypto, citing that it’s an untested and volatile asset.
Speaking to Bloomberg, Hamers asserted, “Clients are looking at different alternatives, and they hear about crypto, and there is a bit of a fear of missing out as well. They read it in the papers, but they also see the volatility.”
Commenting on the bank’s approach to providing exposure to crypto for its wealth management clients, the UBS CEO emphasized that he holds no FOMO towards crypto, noting, “We don’t offer it actively. […] We feel that crypto itself is still an untested asset category.”
Hamers, of course, works within the confines of the traditional finance and banking system, which is a well-tested industry that has caused multiple global financial crises.
Best Cointelegraph Features
Stock-to-flow model possibly invalidated as Bitcoin price loses $30K
Plan B’s stock-to-flow model is the closest it’s ever been to being invalidated as Bitcoin stagnates in the $30,000 range.
China is pumping money out of the US with Bitcoin
Chinese authorities seem to be putting things in order rather than declaring war on crypto, aiming to further weaken the U.S. economy.
It is time for the US to create a ‘Ripple test’ for crypto
The SEC’s approach to crypto must be modified to more clearly articulate how securities laws should apply to digital assets.
The future of art? World-famous artists delve into NFTs
For millennia, the world of art has remained unchanged for the most part. The tradition has always revolved around artists selling their work to museums, galleries, or individual collectors. In return, the artist would get a market value for their work which was often kept in private vaults and only displayed to the public ever so often.
With the advent of NFTs, many artists are now able to take their work and offer it up for sale as a digital collectible. Through these blockchain-enabled digital assets, the artist cannot only maintain ownership of a piece of the art they produce but also gain royalties from sales made in secondary markets.
Undoubtedly, NFTs are changing the contemporary art scene as artists no longer have to rely on galleries and museums as their sole medium through which they can sell their work. This shift in perspective has allowed for greater freedom and choice in the artists’ work while also bringing in new audiences and a new stream of traditional artists to NFTs.
Here is a look at the most famous contemporary artists that have gotten into NFTs lately.
Hirst recently launched “The Currency” project that consists of 10,000 NFTs corresponding to physical prints of his five-year-old artwork now stored in vaults. The NFTs will cost buyers $2,000 per piece and will be available for purchase by the end of the month.
NFTs are changing the world and the art world is increasingly looking toward crypto, however, for Damien Hirst, it’s not all about a get-rich-quick scheme that is portrayed all over the media. The English artist and entrepreneur was once one of the youngest contemporary artists to dominate the U.K. art scene in the 1990s and is the region’s richest living artist, according to reports.
The Currency project is set to blur the lines between fungibility and nonfungibility (especially money and art), as collectors of Hirst’s NFTs will have the choice of either getting the physical painting or the NFT version of the painting. The NFT will be a high-resolution photo of the physical painting.
In an interview with Cointelegraph, Hirst said that he used to give a lot of art away and he would get frustrated whenever people would sell the art.
“I suppose this whole project is like a test. It’s like when you walk downstairs in your house if you got a painting and it’s not long before the spot represents a dollar sign.”
Related: British artist Damien Hirst uses NFTs to blur the boundaries between art and money
Other highlights of Hirst’s work include a 2008 sale of the “Always Beautiful Inside My Head Forever” project that sold for over $220 million in a direct sale at an auction, as well as the “For the love of God” project that entailed a diamond-encrusted skull which sold for $100 million.
In an interview with Cointelegraph, Hirst said that he was annoyed by applications such as iTunes that take ownership away from musicians and applauded NFTs for their contribution in helping artists maintain ownership of their creations.
Related: British art icon Damien Hirst to accept BTC, ETH payments for print run
With a strong background in contemporary art as well as graphic design, Colin Philip Colbert was already a recognized rising star of the pop art world before he joined the NFT space. The British contemporary artist has even gone as far as receiving the praise of legendary designer André Leon Talley. Colbert got his start as an undergrad at the University of St Andrews in Scotland before moving to London’s then-emerging East End arts scene where he conceptualized the project that would become Lobsteropolis.
Based on Colbert’s initial Lobster University project, Lobsteropolis is a digital city built on Decentraland’s blockchain-based virtual world, featuring composite elements of Colbert’s work from several international art exhibitions, shows and museums.
The ambitious project offers a rare glimpse into an emerging industry that features an intersection between blockchain technology and the art world. It also features an open virtual world environment that allows people to interact with one another and the art.
Already, Colbert’s work has attracted the praise of famous personalities in the world of art, including Simon de Pury, a world-renown art auctioneer and curator, and Charles Saatchi, a contemporary art collector and a businessman.
Colbert said that the digital space enables him to explore the narrative of his art in a new way.
One of Lobsteropolis’ most outstanding features is a hybrid artwork and musical performance feature titled Lob-Ster De-Vo which is a rock band-themed multimedia experience. The city is not just an art exhibition but an interactive virtual world as well. Lobsteropolis pushes the boundaries of both virtual and augmented reality in a gameplay experience that allows users to interact with their peers and create several layers of fantasy.
Related: Bringing contemporary pop art to an NFT metaverse
“Bu Tu Garden” is Huang Heshan’s latest NFT-based real estate art that will be showcased at the Taobao Maker Festival. The young Chinese artist who initially assumed that everything blockchain-related would be “very complicated and troublesome to operate” admits to his surprise that working with nonfungible tokens is way easier.
Huang will be launching his virtual “Bu Tu Garden” project at Taobao Maker Festival, which is an annual event that celebrates Chinese art and entrepreneurship. Taobao, an Alibaba-owned platform, will be showcasing NFTs for the first time since the beginning of the festival in 2016.
Huang’s debut NFT art project is built on the NEAR blockchain protocol and is made of a virtual real-estate landscape that comprises more than 1,000 virtual structures, 300 high-end family villas and another 1,000 parasols.
With a background in fine arts, Huang’s Bu Tu Garden takes after the local tastes of Chinese streets in a wild design filled with vibrantly colored trees, inspired by the story of a fictional real-estate tycoon who is dedicated to building up-market housing for the less fortunate.
Another artist who is making a debut into the NFT landscape is Grimes. Popularly known for her exploration of synth-pop music and experimental art, Grimes recently sold her digital artworks for a staggering $6 million in an auction on Nifty Gateway. The artwork includes a series of one-of-a-kind visual and audio artworks. One particular piece called “Death of the Old” sold for over $350,000. A bulk of the sales amounting to more than $6 million originated from individual pieces of art that comprised thousands of copies, selling for $7,500 each.
Related: Musician Grimes’ debut NFT auction generates $5.8M in 20 minutes
The Canadian singer and visual artist already managed to be a critically-acclaimed pop star long before entering the NFT space. Her electronic pop music as well as her relationship with Elon Musk (tech CEO and entrepreneur) has brought her a large following of over 1.9 million people on Instagram. Through her NFT artwork, she showcases her versatile talent in writing, producing and editing her music.
Steve Aoki and Antonio Tudisco
Antoni Tudisco is a creative director and 3D visual artist who was born and raised in Hamburg, Germany. He boasts of a background in media management and web design and development, among other fields of study.
The fashion enthusiast and designer has collaborated with top brands like Adidas, Nike, Versace and Puma, and garnered the attention of artists such as Will Smith. He also has his brand TUDISCO STUDIO, which he recently unveiled at a runway show in New York City.
Now, Tudisco is making a debut into the NFT space by collaborating with American music producer and DJ Steve Aoki to create “Dream Catcher.”
So far, the artwork has already earned more than $4.29 million and entails a collection of NFTs that can be redeemed in the form of a physical screen displaying the artwork. Apart from Tudisco, Aoki has also partnered with motivational speaker Tom Bileu in launching the “Neon Future” NFT set.
The intersection of technology and art
While modern art is becoming increasingly augmented with technology, some still believe that there will always be a place for traditional artwork in galleries and auction houses. However, one of the best aspects of NFTs is that they offer an opportunity for new artists to get a market for their art, especially for artists who are not able to enroll in prestigious fine art graduate programs. With NFTs, artists can sell their work directly to collectors and without the need for intermediaries. They no longer have to worry about geographical, financial and educational barriers. Is this the future of contemporary art?
DeFi industry draws in commercial banks? Siam bets with $110M fund
While serious institutional interest in crypto is perhaps becoming more of an established trend than an emerging narrative, the focus of big-money players is usually on Bitcoin (BTC). However, assets like Ether (ETH) and decentralized finance (DeFi) are beginning to pique the attention of major investors.
For Siam Commercial Bank (SCB), DeFi is a major focus point of its current digital asset drive, as Thailand’s oldest bank prepares itself for the expected financial technological disruption of decentralized finance. While other banks are still undecided or only making temporary forays into interacting with digital assets, SCB says it is keen on committing funds to explore the blockchain and DeFi space.
SCB’s DeFi focus is also coming at a time when regulators in Thailand are targeting the decentralized finance space for more stringent regulations. Indeed, regulatory attention is increasingly coming the way of the niche market space with national and intergovernmental agencies looking to craft legal policies for the DeFi market.
DeFi initially held the promise of decentralization; the disintermediation of the established gatekeepers of global finance. However, with banks and financial institutions investing in decentralized technology, the narrative appears to be shifting towards a hybrid form of DeFi known as regulated DeFi, which combines the extant norms and efficiency of traditional finance, instant settlements and cost reduction benefits associated with decentralized protocols.
Siam Commercial Bank’s $110 million blockchain war chest started as a $50 million seed fund initiated back in February by SCB 10X, the bank’s venture arm. As reported by Cointelegraph at the time, the fund further strengthened the bank’s forward-thinking approach to the emerging developments in digital finance.
In a conversation with Cointelegraph, Mukaya ‘Tai’ Panich, chief venture and investment officer at SCB 10X, said that DeFi was a sort of revelation for the bank during its assessment of the emerging digital finance landscape.
“We were doing work on the blockchain industry and started looking into DeFi. And we were amazed by it,” Panich told Cointelegraph. According to the SCB 10X executive, the bank was quick to spot the paradigm shift of potential DeFi technology and the possible disintermediation of the traditional financial institutions.
“DeFi projects can be completely automated,” he said, noting that human involvement would be restricted to smart contract code upgrades. Panich also touched on the revolutionary nature of smart contracts and how lines of code can enable direct transactions between entities like lenders and borrowers without the need for a central counterparty.
Given the possibility of DeFi upending the legacy finance status quo, Panich says banks would do well to prepare for the imminent disruption:
“The reason we want to invest in DeFi and be part of the DeFi protocol’s ecosystem is because we want to understand and capitalize on DeFi, given its potential to meaningfully impact the financial industry.”
At $110 million, the blockchain and DeFi fund is almost half of the SCB 10X’s $220 million venture capital fund. Commenting on the size of the allocation to digital assets, Panich said that it was a reflection of the bank’s commitment to the DeFi space, adding:
“SCB 10X has invested and developed multiple collaborative relationships with the blockchain community in Asia and across the world including Ripple, BlockFi, Sygnum, Alpha Finance Lab, Anchorage, Anchor Protocol (part of Terra chain), Axelar and Ape Board, among others.”
Related: Thai bank’s venture arm invests in institutional crypto custodian Anchorage
Upending global finance
Back in April, John Whelan, head of Banco Santander’s blockchain lab in Madrid, put forward an argument for regulated DeFi. According to Whelan, private layer-two settlement networks for asset classes running on top of public blockchains will likely emerge in the future.
According to Whelan, blockchain adoption for reducing transaction settlement throughput is a major focus point for legacy finance stakeholders. Whelan’s comments highlighted the emerging narrative that rather than disintermediation, financial institutions will find means to adopt DeFi tech to their own backend processes.
Panich also echoed similar sentiments, telling Cointelegraph: “I want to point out that I really see a future where traditional financial companies will work together with DeFi companies. My view is that in the future, there will be an integration of traditional finance with DeFi.”
According to the SCB 10X chief investment officer, banks and financial institutions have the necessary “customer-facing” experience to better offer innovative fintech services to consumers. “In the future, I can see a world where DeFi can power the back-end of traditional finance companies,” Panich added.
For Rachid Ajaja, CEO and co-founder of decentralized capital market outfit AllianceBlock, the promised upending of legacy finance by DeFi is something that will happen in the long term. However, Ajaja said the short-term trend will consist of more financial institutions leveraging aspects of decentralized finance.
The AllianceBlock CEO drew parallels with the digital transformation era that saw the emergence of fintech companies providing services via APIs that interface with the banking system. “With the bridging of DeFi and financial institutions, we will see exactly the same thing, and bit by bit, legacy systems will change,” Ajaja told Cointelegraph, adding:
“Long term, I am absolutely confident that DeFi will upend the global financial system completely because everything that is done in traditional finance can be replicated in DeFi with lower cost, less need for a middleman, new opportunities and increased new revenue streams. It’s only a matter of time.”
Craig Russo, director of innovation at the nonfungible token vault and marketplace protocol PolyientX, also provided further insight as to the possible future path for DeFi adoption in global finance. Russo told Cointelegraph that financial institutions will most likely adopt open-access protocols via initiatives like Compound Treasury while also utilizing DeFi technology within their internal systems.
“A big goal of the DeFi movement is to revamp the current economic system to better align incentive structures, which may ultimately come at odds with the interests of some institutions while opening the door to a new wave of fintech innovation,” Russo added.
Related: Thailand to target DeFi in latest regulatory clampdown
Dealing with regulatory pressure
As the SCB continues with its exploration of blockchain investment opportunities, authorities in Thailand are shining the regulatory spotlight on DeFi. Back in June, Thailand’s Securities and Exchange Commission (SEC) announced plans to consider a licensing regime for the decentralized finance protocols, especially projects that issue tokens.
Commenting on how the bank will handle the increased scrutiny of the DeFi space, Panich stated, “SCB 10X’s aim is to absolutely work within the regulations laid out by the government and regulators such as the Thai SEC and the Bank of Thailand.”
“Blockchain and DeFi are very young, emerging and fast-changing industries. As a TradFi player active in DeFi, it is incumbent upon us to work closely with the government and regulators to help put forward the DeFi industry’s perspective, finding optimal ways to move the industry rapidly forward.”
The Thai SEC’s plan to consider DeFi regulations is indicative of the current attention being paid to DeFi by regulators across the globe. Also in June, the World Economic Forum released a policy toolkit for fair and efficient DeFi regulations.
The emphasis on fair and efficient regulations is likely based on fears that blockchain startups may be at a disadvantage from a compliance standpoint if more stringent measures are applied to DeFi. Regulated entities like banks and financial institutions may find it easier to negotiate these policy constraints.
Indeed, AllianceBlock’s Ajaja made this same point to Cointelegraph, stating, “DeFi primitives are definitely at a disadvantage in this regard against their counterparts in mainstream finance.” As such, Ajaja stated that compliance gateways for protocols like Know Your Customer and Anti-Money Laundering are necessary for greater compatibility with mainstream finance and the move towards interfacing with real-world assets for DeFi primitives.
3 reasons why Bitcoin price has not been able to rally back above $40K
CryptoArena – Cointelegraph Magazine
It’s Digi – Cointelegraph Magazine
3 reasons why Bitcoin price has not been able to rally back above $40K
CryptoArena – Cointelegraph Magazine
It’s Digi – Cointelegraph Magazine
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