Back

DeFi Is Flourishing – BIS Concerned for TradFi

07.12.2021

Yet more confidence has been shown in the decentralized future of the electronic financial system this week.

Volatility is abound among the major cryptocurrencies, with the sell-off during the latter part of the first week in December having been the focus of many reports this week, however that focuses largely on Bitcoin as a store of value, and the values having been at enough of a high point for many whales to re-activate large amounts of Bitcoin from cold storage and place them on active exchanges.

The technological advancements that are being made in blockchain infrastructure to support further moves toward a totally decentralized electronic financial services structure globally are currently very much in focus.

Whilst Bitcoin dived to below $50,000 in value late last week before beginning to pick up this morning, clearly signifying a volatile market for those wishing to invest and make returns on their investment, Ethereum has trodden a slightly different path.

This is largely because there is a marked difference in the basis for investment between Bitcoin and Ethereum. Whilst Bitcoin is very much a tradeable asset and is the beacon of aspiration for the future of the financial market with projections by mainstream analysts at previously sceptical Tier 1 banks predicting values of over $100,000 in the near future, whereas Ethereum has gained a large following for different reasons; its ability to revolutionize the way which financial transactions take place.

This has been demonstrated once again this week, as Ethereum values have begun to accelerate very quickly following the weekend of volatile cryptocurrency markets, and once again, it is the decentralization possibilities that are behind the increase.

With the exception of the dollar-pegged stable coins and Ethereum, all other seven of the top 10 digital tokens were trading in the red during the early hours of the morning European time.

Ethereum’s increase in value has been interesting this time. Against a backdrop of suppressed Bitcoin values, Ethereum’s confident move forward may well be linked to the interest in it shown by individuals and entities who see the value of its technological advancement toward the decentralized finance (DeFi) world of the future.

Most certainly as regulations are being looked at closely for cryptocurrencies by many nations with advanced financial markets economies such as the United States, there is a clear understanding by analytical people that DeFi is very much instrumental to the landscape of the world’s financial future.

So much so, it seems, that the Bank For International Settlements (BIS) which is a Swiss financial institution owned by global central banks that fosters international monetary and financial cooperation and serves as a bank for central banks has made its opinion very clear with regard to DeFi this week.

The BIS has said “We argue that full decentralization in DeFi is an illusion”, despite the vast array of DeFi projects now operating at extremely high level across the world’s financial ecosystem, many of which are being operated by some of the most influential people in the world including Kimbal Musk, the brother of the richest man in the world, Elon Musk.

DeFi coins and native tokens are the absolute order of the day, and any sophisticated cryptocurrency exchange or digital asset venue worth its salt would clearly have its own native token in order to assist its users in the participation in a decentralized, trust-based and democratized economy of the future with no intermediaries which reduces the cost and increases the efficiency of doing business worldwide.

Smart contracts for the purposes of lending, creating property rental agreements, employment assignments and contractual obligations between two parties whilst settling on the blockchain are vital to the future of the economy, but clearly ‘people power’ of this magnitude is feared by those with control over the monetary aspirations of the world’s populace.

The BIS has stated that there are three areas that financial markets regulators could address through centralized organizational bodies, including consumer protection, guarding against money laundering and criminal activities, and financial stability – to what extent the DeFi ecosystem will overlap with the conventional financial system.

This is really a concern that demonstrates the very real likelihood that many individuals and businesses are taking up the chance to operate within the DeFi sector, as it democratizes their interaction with the financial world and gives power to them, rather than to expensive middle men and policymakers.

The possibilities with DeFi are huge and currently with new DeFi projects coming to fruition every week, it is important to choose a digital asset exchange with a quality fiat on and off ramp and which is regulated in order to conduct your business in a sustainable manner when accessing the vast range of DeFi services.

CoinMetro is therefore your natural partner to support your participation in decentralized financial services, as it is a fully regulated, multi-faceted cryptocurrency exchange with its own ERC-20 based native token, XCM and a fully regulated payment channel with an Electronic Money Institution (EMI) license.

CoinMetro also offers business accounts to small to medium sized enterprises in order that treasury can be settled in cryptocurrency, which is an ideal product for companies wishing to make use of the smart contract functionality within Ethereum that is currently beginning to show its mettle in powering the world’s new economy.

The dichotomy is here and it consists of those who will be left behind and defend the old guard, and those who will flourish by taking full advantage of what DeFi has to offer.