- June 13, 2021
Decentralised finance (DeFi) is now being taken seriously by traditional finance. In a European-wide survey of financial institutions spanning across insurance, banking and trading, 86% are implementing or assessing services built on a DeFi framework.
Of those companies, 31% are reporting an enterprise-wide rollout or have deployed use cases of DeFi. Additionally, 58% of companies are concerned they will lose a competitive advantage by ignoring DeFi instruments.
From the companies implementing decentralised finance, 35% are collaborating with an existing consortium, platform, application or service. 24% are developing their own consortium or platform and 22% are going to collaborate with competitors because the current ecosystem is not compatible with their requirements.
The research, conducted by BCG Platinion (part of Boston Consulting Group) and Crypto.com, analyses the uptake of decentralised services amongst traditional financial institutions. From 400 companies across Europe, 71% with a turnover or balance sheet above £10bn assessed or implemented DeFi, compared with 51% of companies turning over less than £100m.
Of companies assessing or implementing the blockchain technology, 42% are pivoting to a more decentralised approach to asset management. 38% of companies are using it to facilitate faster, more secure, payment processing services, rising to 61% for the biggest companies.
Conversely, 70% believe security concerns over fraud is a challenge preventing company wide adoption of DeFi, and 15% of decision makers strongly believe that whilst decentralised finance is a threat, their companies are against its adoption.
The research also considered the impact DeFi will have on business and operating models and 59% of companies say they will have to implement a new governance structure. But 70% of companies say restructuring the business model or decoupling decentralised finance will increase the speed and lower the cost for financial transactions. 67% said it would open up new revenue streams and 61% said they believe smart contracts are an important business driver for considering or adopting DeFi as a way to execute financial services.
At the same time, a lack of regulation is a challenge for 61% of companies, increasing for companies with a larger turnover or more assets under management. That decentralised finance is over collateralized is also a concern for investment bankers and asset managers, more so than other areas of finance. And sharing their anxiety with a recent FCA announcement, 60% of companies are worried about a lack of recovery mechanisms.
Kris Marszalek, Co-founder and CEO of Crypto.comsaid, "The research shows that DeFi's adoption is not limited to just the blockchain industry; traditional financial institutions of all sizes are viewing DeFi not as a competitive threat but rather as a valuable instrument to delivering more decentralized, efficient financial services. This is shown in their warming attitudes towards DeFi and its integral role in future plans for the vast majority of them."
Kaj Burchardi, Managing Director of BCG Platinion,adds, "As markets evolve towards
decentralisation, there will be a growing demand for approaches like DeFi which can provide a
more efficient and more open way of banking, trading and investing. "It is encouraging to find that financial institutions are already seriously, and strategically, collaborating with the crypto community to begin building a new generation of governance and technologically resilient solutions that will make financial services more accessible.
However, there is still quite some progress to be made in order to bring DeFi into the mainstream especially in security and compliance."
The views expressed in this article are the author's own and do not necessarily reflect the view of Hotpot Crypto. Hotpot Crypto shall not be held liable under any circumstances for any losses, damages or expenses arising from the use of any content mentioned in this article.
The information contained on this website is provided for informational purposes only, with no warranties, or guarantees made as to the accuracy, completeness or timeliness of it. Hotpot Crypto assumes no liability or responsibility for any errors or omissions in the information contained on this site. We strongly encourage you to conduct your own research before taking any action.
This site may contain copyrighted material, the use of which has not always been specifically authorized by the copyright owner. If you wish to use the copyrighted material from this site for the purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Authors or publishers who claim ownership of copyrighted articles reprinted on this website and wish for the content to be removed may email us directly at firstname.lastname@example.org
If you would like to connect with us about any of the distributed content or other inquiries, please email us at email@example.com with the relevant documentation.