Cointelegraph Consulting: Research outlines how DeFi can merge with traditional finance

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New research finds that regulated financial institutions can interface with decentralized finance via digital asset marketplaces.

While public adoption of crypto assets is increasing, global regulations continue to progress and recognize decentralized technologies as a suitable infrastructure for the dematerialization of securities. In Luxembourg, the country that is second in the world in terms of assets under management, the country’s regulator adopted a bill that explicitly recognizes the possibility of using distributed ledger technology for the dematerialization of securities. 

The regulation is moving quickly elsewhere across Europe: Tokenized securities now fall under the same rules and regulations as traditional financial instruments in many other European countries including France, Switzerland, Germany, Italy, the Netherlands, Romania, Spain and the United Kingdom.

Read the e-book to discover how you can be part of this emerging digital asset industry. Download the full report here.

What’s next for the industry? Due to the increase in public adoption and the favorable regulatory environment, demand from the financial industry to access digital networks is on the rise. So far, banks have digitized the retail industry, but not much has evolved in capital markets.

The digitization of this industry is now possible through the blockchain, an infrastructure now widely recognized by the largest governments globally for financial instruments. Funds and asset managers can now upgrade their distribution channels by launching digital asset marketplaces, or DAMs, and connecting to others via decentralized networks.

DAMs will help their customers discover new opportunities, manage their investments and even open secondary market possibilities. In this ebook, industry participants explain how capital market players can benefit from blockchain by launching a DAM and maximizing the monetization of their investor base.

Financial institutions are beginning to publicly embrace and adopt the technology. So far, they have started, as expected, with crypto assets. Once they begin to trust the technology and it becomes embedded within their portfolios, it will mean one thing: Curiosity will peak, and these institutions will realize the operational benefits of decentralized technology.

Driven by increased confidence in the technology, and pressured by DeFi replacing many traditional banking functions, institutions will begin to learn that the technology can solve long-standing and deeply entrenched industry problems, particularly in the opaque and highly illiquid private markets.

Digital asset marketplaces — i.e., primary and secondary venues where investors meet — will be the driver for this, according to the study. However, open-source standards like the Token for Regulated EXchanges are required to enforce compliance on-chain in a heavily regulated world.