DeFi Will Be Just Fi

European Blockchain Convection hosted an exciting conversation featuring crypto market leaders who agreed that decentralized finance (DeFi) would ultimately become the future of finance. The discussion sought to understand how institutional investors can access DeFi.

With institutional investors, regulation has to be there for this particular group to feel comfortable with the crypto market. This was quite clear from a previous panel, where the consensus was there is no way asset managers are putting clients’ money into crypto without feeling the space is safe enough from a regulatory point of view.

Visual of Sheraz Ahmed, Chris Sullivan, Philipp Peiper and Lone Fonss at the 6th EBC

According to Chris Sullivan, Co-founder of Hyperion Decimus, the first layer of regulation should protect investors from fraud which unfortunately doesn’t happen with the existing rules. A recent report by Elliptic, a London-based firm, indicates that investors have lost over $10 billion on DeFi products.

“The first layer of regulation should protect investors from fraud”Chris Sullivan, Co-founder of Hyperion Decimus

According to Sullivan, the crypto community should create a set of principles for how the area should grow, including clear procedures for how businesses and products can be developed.

The problem of relying on regulators is that they always have to play catch up to a space that is developing at a breathtaking pace. However, according to Sullivan, institutional fund managers, in areas where regulators move fast to address fraudulent behavior, can have strong audit protocols that help them smell out fraudulent projects early, which benefits their clients.

Rise Of Regulatory Compliant DeFi Protocols

Concordium is an example of a regulatory compliant DeFi project that identifies users at the protocol level, thereby boosting trust between the involved parties and allowing for accountability with relevant regulators. However, the ID stamps are encrypted, allowing for private transactions. Lone Fonss Schroder, the company CEO, says that the project is in a position to build substantial and institutionalized products through its CCD token that will facilitate stable prices with low fees.

“Concordium is in a position to build substantial and institutionalized products through its CCD token that will facilitate stable prices with low fees.” – Lone Fonss Schroder, CEO of Concordium

Panel Discussion visual elaborated by EBC team

In simple terms, the project serves as a regulatory decentralized finance laboratory where anyone can go and build and gain access to grants as they prepare for the coming of regulation within the market.

“Concordium serves as a regulatory decentralized finance laboratory”Lone Fonss Schroder, CEO of Concordium

The need to create trust and do things right is a significant driver for upcoming regulatory compliant DeFi protocols. And even though the space is full of experimental projects, Schroder believes it is irresponsible to allow half-baked projects to thrive where investor money is involved, just like a test car can not be allowed to the market without proper assurance it meets all the safety requirements.

Trust is an interesting concept within decentralized markets since these P2P protocols are defined as “trustless.” According to Philipp Pieper, Co-founder of Swarm Markets, the first BaFin-regulated decentralized exchange, the term has implications for the user since it’s their responsibility to hold their private keys and determine what goes on with their assets. DeFi has expanded on the principle by allowing individuals not to rely on centralized platforms to move their assets or transact, thus boosting self-custody and self-sovereignty.

“DeFi has expanded on the principle by allowing individuals not to rely on centralized platforms”Philipp Pieper, Co-founder of Swarm Markets

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Published December 15,  2021, Barcelona

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