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Traditional Finance Is Watching The Rise of DeFi Closely, Crypto.com and BCG Study Finds

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Traditional Finance Is Watching The Rise of DeFi Closely, Crypto.com and BCG Study Finds | Crypto Briefing














Though DeFi summer has come to a conclusion, the crypto niche continues locking up value by the billions of dollars. New research now reports that traditional finance is also taking note. 


Key Takeaways

  • In a survey led by BCG and Crypto.com, a vast majority of financial institutions are exploring DeFi.
  • Many of these firms command multi-billion dollar balance sheets and could shift the needle upon entering the space.
  • Security concerns and regulatory uncertainty are the two largest barriers.

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Leading tokens from this summer’s DeFi craze may be crashing, but the sector is far from over. And with interest from multi-billion dollar institutions, many believe that true innovation has only just begun. 

Traditional Finance Wants a Piece of the DeFi Pie

In collaboration with Boston Consulting Group Platinion (BCG), leading crypto company Crypto.com revealed that a staggering 86% of financial institutions surveyed are exploring DeFi. 

The research confirms many of the suspicions within the crypto community: Institutions are coming. What’s more, these firms are eager to find collaborators. 

Eric Anziani, the COO of Crypto.com, told Crypto Briefing that: 

“A surprising 86% are implementing or assessing services built on a DeFi framework and most (35%) of them are collaborating with an existing consortium, platform, application, or service to roll that out. This indicates an appetite for collaboration between traditional finance organizations and blockchain firms who hold the DeFi technological expertise, as only 24% are developing their own consortium or platform.”

These organizations are turning to crypto technologies for several reasons, including improving remittances and payments networks. 

Though many crypto enthusiasts complain about slow transaction speeds on leading networks like Bitcoin and Ethereum, these are nothing compared to transactions made outside of crypto. 

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Though it is unclear precisely which network is leading the race, Anziani confirmed that “cryptocurrencies with fast transaction speeds, lower fees, and a decentralized approach offers a clear competitor to legacy financial systems.” 

The companies pouring into the space are no small fish either. Roughly 70% of the organizations surveyed command more than $12 billion on their balance sheets. Though the research indicates that only a minority have already deployed crypto-based use cases, the vast majority have made DeFi a high priority item for further investigation, according to Anziani. 

This exploration is currently being executed via existing consortiums and platforms. Naturally, interest from this demographic of business is hugely beneficial for crypto-specific companies like Crypto.com. Anziani said:

“The crypto payment solution we have been building and recently launched to a new testnet Croseid, is a great example of the types of products these institutions will be looking at. It enables transactions worldwide between people and businesses in a permission-less manner, with the support of settlement agents and validators, rewarded in our native token CRO. This will reduce up to 80% of processing fees compared with existing payment solutions.”

Indeed, firms like Crypto.com that are open to building a bridge between both worlds are at a huge advantage. That doesn’t mean that further adoption will be easy, however.

Roadblocks Ahead for Further Adoption

Hedge funds, trading desks, and financial brokers have a much different risk profile than the average DeFi user. And with hacks sprouting up nearly every day, security is still a formidable barrier for these multi-billion dollar companies. 

Alongside tampering major risks, firms are keenly aware of the rise of regulations focused on roping in the crypto market. This focus has been seen in the takedown of the long-time Bitcoin derivatives exchange, BitMEX, as well as Britain’s financial watchdog banning crypto derivatives trading. 

Regulators are also interested in addressing the growing popularity of privately-issued stablecoins like Tether’s USDT and Circle’s USDC. Various governments have been clear that national currencies, or cryptocurrencies pegged to fiat, will only be distributed by central banks. 

Far from over, regulatory discussions are ongoing. And according to Anziani, the crypto space must participate in this dialogue. He said:

“With the continued growth and adoption of crypto worldwide, regulators are keen to ensure that markets are protected from fraud and to keep their financial users’ interests safe. We must continue to work with regulators to support their concerns and find common ground policies that protect all parties involved and ensure that the full potential of decentralized finance is still able to be realized.” 

Adding the Next $10 Billion to DeFi

Retail investors have primarily dominated DeFi. And so far, that has been sufficient to continue growing the sector. 

Adding the next $10 billion, however, will come from a much different source. 

According to the research from BCG and Crypto.com, institutional investors are watching closely. Polishing regulatory guidelines and doubling down on security measures will help them make the next step, and bring DeFi across the line.

Disclosure: Crypto.com is a sponsor of Crypto Briefing.

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Source: https://cryptobriefing.com/traditional-finance-is-watching-rise-defi-closely-crypto-com-bcg-study-finds/

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The Changes Continue: Facebook’s Libra Has Been Rebranded To Diem

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  • Facebook shook the world last year after announcing plans to introduce a “single global digital currency” dubbed Libra. However, the social media giant’s efforts were quickly scalded by global regulators as the project received massive blowback.
  • Facebook didn’t give up on its idea. Instead, the company decided to rebrand its two main products. Firstly, the Calibra wallet became Novi, and today, Reuters reported that the Libra name had been changed to Diem (meaning ‘day’ in Latin.) 
  • Stuart Levey, CEO of the Geneva-based Diem Association behind the digital coin, confirmed that the name change comes as a direct consequence of the regulatory hurdles. He noted that “the original name was tied to an early iteration of the project that received a difficult reception from regulators. We have dramatically changed that proposition.”
  • The Diem currency would operate as a signal dollar-backed digital coin. Although Levey failed to specify the timing of the launch, recent reports suggested that it may arrive as early as January 2021. 
  • Levey further explained that the Novi team has already begun building a digital wallet that will eventually hold Diem coins. Apart from waiting for approval from Swiss regulators to launch, the Diem Network is also in talks with US federal and state watchdogs. However, Levey didn’t disclose the nature of those negotiations. 
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Source: https://cryptopotato.com/the-changes-continue-facebooks-libra-has-been-rebranded-to-diem/

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Coinbase Faciliated MicroStrategy’s $425M Bitcoin Purchase Without Moving The Market

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The leading US-based cryptocurrency exchange Coinbase assisted in MicroStrategy’s massive purchase of $425 million worth of BTC. The platform pledged to help other large firms diversify their portfolios with bitcoin in the future as well.

Coinbase Involved In MicroStrategy’s BTC Purchase

The NASDAQ-listed business intelligence firm made the news on two occasions earlier this year as it announced the total purchase of 38,250 bitcoins. At the time, this sizeable amount equaled about $425 million.

However, the entity that helped broker the deal remained unknown until today. The San Francisco-based crypto exchange Coinbase announced that it was “selected as the primary execution partner for MicroStrategy’s $425 million purchase of Bitcoin.”

The community speculated on how such a considerable amount didn’t move the markets as the price of BTC remained relatively still back then. Coinbase explained that this was the company’s intention in the first place:

“Using our advanced execution capabilities, leading crypto prime brokerage platform, and OTC desk, we were able to buy a significant amount of bitcoin on behalf of MicroStrategy and did so without moving the market.”

Furthermore, the exchange noted that its system takes a single large order and breaks it into many small pieces that are executed across multiple trading venues. This type of smart order routing reduces the trade’s impact on the market and assists in disguising the overall trade size.

This also helped MicroStrategy to get a better price for its BTC purchase as Coinbase’s trading team “achieved an average execution price that was less than the price at which the buying started.” The post highlighted that this strategy ultimately saved 1% (or about $4.25 million) for the NASDAQ-listed company.

More Large Companies To Come?

MicroStrategy’s purchase kicked off a wave of large companies and prominent individual investors who expressed willingness to get in bitcoin as well.

Jack Dorsey’s Square followed with a $50 million BTC allocation. More recently, the Wall Street giant Guggenheim Partners filed a document with the SEC to purchase about $500 million worth of bitcoin for one of its funds.

Coinbase asserted that more firms will look to BTC to hedge or diversify their excess cash. Consequently, the large US exchange will “look forward to helping more corporate companies and institutions looking to diversify their capital allocation strategies with crypto.”

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Source: https://cryptopotato.com/coinbase-faciliated-microstrategys-425m-bitcoin-purchase-without-moving-the-market/

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U.S. DoJ Extradites Key Member of Crypto Ponzi Scheme From Panama

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The U.S. Department of Justice (DoJ) has extradited a principal member of a fraudulent cryptocurrency mining and trading platform from Panama to the United States.

AirBit Club Co-founder to Face Criminal Charges in the U.S.

According to an announcement by the acting U.S. attorney for the Southern District of New York, Audrey Strauss, U.S. authorities were able to extradite Gutemberg Dos Santos, co-founder of crypto Ponzi scheme AirBit Club.

Dos Santos, who holds dual citizenship from Brazil and the United States, was extradited to the U.S. from Panama on Nov. 23, 2020. According to Strauss, Dos Santos’ repatriation was possible with the help of the Homeland Security Investigations (HSI).

As reported by CryptoPotato back in August, the U.S. authorities arrested five individuals who were involved in the AirBit Club scheme that fleeced unsuspecting victims of $20 million. Operators of the crypto Ponzi scheme ran false advertisements that promised users hyperbolic rewards from Bitcoin trading and mining.

However, the DoJ at the time alleged that the group only sought to live flamboyant lifestyles of victims’ funds. While spending money on luxury homes and cars, they reportedly made more moves to recruit more victims across the U.S and different other countries.

A statement from the DoJ document reads:

“The extradition of Dos Santos reflects the determination of agents from HSI New York’s El Dorado Financial Crimes Task Force to dismantle global criminal organizations, wherever the investigation takes us. Utilizing our broad authorities and network of law enforcement partners, HSI will continue to hunt those who allegedly prey upon innocent citizens for financial gain.”

Also, if Dos Santos is found guilty of the charges levied against him, the AirtBit Club co-founder could face between 20-30 years in prison.

Law Enforcement Fighting Crypto Crimes

Regulatory authorities globally continue to warn investors about fake crypto-related schemes that promise high returns. According to a recent report by CryptoPotato, Chinese authorities confiscated $4 billion worth of crypto tokens from PlusToken scammers.

PlusToken, which is one of the biggest cryptocurrency Ponzi schemes, promised users high returns, similar to other crypto fraudulent projects. The Chinese law enforcement began investigating the project after it shut down in 2019. In July, the police arrested 27 key members of the scam project, along with 82 other members.

Another major fraudulent crypto scheme, OneCoin, reportedly stole $4 billion from investors with its founder Ruja Ignatova also known as “Crypto Queen,” still at large. Meanwhile, Ruja’s brother Konstantin Ignatov has been arrested by the U.S. authorities since 2019 and could face a 90-year prison sentence.

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Source: https://cryptopotato.com/u-s-doj-extradites-key-member-of-crypto-ponzi-scheme-from-panama/

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