Thailand’s oldest bank sees blockchain and DeFi as the future of global finance and is seeking to invest in the emerging digital landscape.
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.”
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.
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.
So far, throughout the cryptocurrency industry, Ethereum has been the leader when it comes to smart contract capabilities as well as a number of projects that run on its network, however, there has also been a push to add these developments to Bitcoin.
One of these projects is Stacks STX/USD, which is a layer-one blockchain protocol fully designed to provide smart contracts as well as decentralized applications (dApps) to Bitcoin.
On July 10, STX created and sold the first NFT on Bitcoin from the Stacks foundation. This marked a new beginning of smart contacts on Bitcoin. It was called Cara Delevingne’s “Mine” and sold for 18,000 STX.
Developments such as these increase the demand for the STX token and with its increased circulating supply, the value will increase as well.
On July 21, we saw the introduction of Clarinet, which was a tool built by Ludovic Galabru that streamlined the process of developing, testing, and deploying Clarity smart contracts. Through the development of tools such as these, we can potentially see a lot more developers becoming interested in developing on Stacks, which will in turn increase the demand for the STX token and increase its circulating supply and value.
Another interesting aspect surrounding STX is that users can stake STX to earn BTC as a reward. This is done through proof-of-transfer (Pox) which runs alongside Bitcoin and uses its network as a broadcaster. This is earned at an average rate of around 10%.
Stacks price analysis: Should you invest in Stacks (STX)?
On July 23, Stacks had a value of $1.08.
To compare its current value with its potential growth, we need to look at its all-time high.
STX had an all-time high value of $2.92 that was on April 05, 2021. To get a better perspective of its ups and downs as of recently, let’s look at how it grew across June and July.
On June 3, it had one of its highest values at $1.04 and one of the lowest at $0.53 on June 22. However, on July 11, after news came of the first NFT sold, its value got up to $1.45. This gives us a perspective as to the jumps in the value we can expect the STX token to get.
In other words, at the $1.08 price point, STX is a worthwhile investment, especially given its new developments with tools such as Clarinet and the Clarity programming language. We can expect its value to increase to $1.40 by the end of August.
The post Stacks price analysis: Should you invest in Stacks (STX)? appeared first on Invezz.
from Cryptocurrency – Invezz
Changpeng Zhao, the CEO of Binance, says going public could be on the cards for the US chapter of the cryptocurrency exchange that has found itself in regulatory crosshairs across the globe
CZ said that the plan is to change its business model in the US so that instead of operating as a tech startup, it pivots to become a financial service provider.
The Binance chief revealed this during REDeFiNE Tomorrow 2021, where he averred that the exchange was working on how to improve compliance, including hiring or working closely with former regulators.
Asked about the potential for an initial public offering (IPO), he responded affirmatively, adding that the ‘IPO route’ is a possibility given the exchange is already “setting up those structures to make it easier for an IPO to happen.”
“Binance US is looking at the IPO route. Most regulators are familiar with a certain pattern [like] having [an] HQ or having [a] corporate structure,” he added.
The news comes at a time when the cryptocurrency exchange has continued to face increased regulatory scrutiny from various financial regulators across the globe.
Across its businesses, Binance has faced scrutiny in the UK, the US, Singapore, Germany, and Italy, among other jurisdictions.
However, Zhao also acknowledged that communication with regulators has not been the exchange’s “strong suit.” According to him, this might improve if regulatory bodies localised the communication process.
While the exchange looks to go public by taking the necessary steps, CZ has tamed expectations by stating that there is “no direct plan for IPO right now.”
Instead, the exchange will continue to prioritise market growth, especially away from active trading and into the burgeoning space of crypto gaming, decentralized finance (DeFi), and NFTs.
Binance US launched its operations in the United States in 2019.
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