An overview of what is happening in the crypto markets, summarised daily by Crypto Finance AG Senior Trader Patrick Heusser in the market commentary.
We have a vision of the future at the Crypto Broker dealing desk. And China seems to have one, too…
It was not a dramatic headline, but it stopped me in my tracks: “Shanghai government explores DeFi”. The headline caused me to respond because I have a vision of where I think financial markets could be in 5-10 years. The building blocks involved are the following:
- Stablecoins (CBDC)
- More efficient admin workflows for banks through blockchain technology (BSN – blockchain service network)
- DeFi giving back both power and responsibility to investors (both big and small)
If you look at these points, it is clear which nation is at the forefront: China. However, at least on the lawmaker front, Switzerland is well positioned. What strikes me is that market players (mainly banks and exchanges) do not truly understand the importance of familiarising themselves with blockchain technology and the fast growing ecosystems that have evolved over the past few years. In my opinion, their biggest mistake is labeling the crypto market as “bad” and trying to be “hip” by only focusing on tokenisation. You cannot run before you can walk (I know this may sound cheap, but hear me out).
When I first went down the crypto rabbit hole, my main question was always: “How can we combine the two ecosystems: traditional finance / trustless-decentralised finance?" I am always on the lookout for “bridges” where there is a possibility to combine or bridge new inventions/services. This is because I am not a believer in the total collapse of one system and the rise of another. In my view, in order for it to be possible to build (or even see) those bridges, you need to start with the very basics of the up and coming trustless-decentralised finance ecosystem. If you do that, you will see that the topics mentioned above are essential before you start a tokenisation project. If you don't start there, you will miss the majority of the benefits that will emerge over the next 5-10 years.
Also, if banks were willing to do more than just dip their toes in the pool and actually dive in properly, they might realise that there will be no need for exchanges in the future (at least not in their current form). In my vision of the future, both the end user and the (remaining) banks will benefit from the new financial ecosystem. The dependency will be substantially less, which will give the customer greater freedom in terms of choosing services and products, and banks will be able to save costs.
Compliance will be one of the massive hurdles the ecosystem will need to cross. This is also the topic most traditional banks currently hide behind. Here is an example from this weekend: to me it looks like the trustless-decentralised finance ecosystem is handling the Kucoin hack pretty professionally, and that the attacker (and the stolen funds) have been put in the spotlight. In my view, this is socially governed AML. I will admit, of course, that there is still a great deal more to do until compliance standards are where they should be. But if we can cross the bridge between traditional finance and DeFi (with all its facets of borrowing/lending, automated strategy execution, tokenisation, etc.), then we will make it to the point where my vision of the future begins.