BlackRock’s Bitcoin ETF launch and the participation of Charles Schwab, Fidelity, and Citadel Securities in EDX Markets have sparked investor interest. Enhancing institutional adoption and establishing trust require discussing infrastructure improvements for traditional finance players entering the crypto market.
This essential panel is moderated by Madeleine Boys, Head of Community at GBBC, who leads the discussion with Vincent Dulhoste, CTO of Kaiko, Glib Udovychenko, Founder and CEO of Whitepay, David Engel, Head of Business Development at StarkWare, and Rajiv Sainani, Head of European Business Development at MakerDAO.
Key Infrastructure Components To Scale the Institutional Adoption of Crypto
David emphasizes the need for regulatory clarity and the necessary technical infrastructure, including wallets, protocols, and liquidity. Rajiv echoes David, highlighting the importance of bridging the gap between on-chain and off-chain and improving the efficiency on and off-ramps.
In order to create a seamless off-chain experience, Vincent emphasizes the importance of interoperability and composability in DeFi to provide a better experience for institutional adoption.
Personal Experiences of Interacting With Institutions
Glib shares that during the war in Ukraine, Whitepay implemented crypto processing for President Zelenskyy’s website to collect over 12 million in crypto for funding. This experience led the team to work on similar crypto projects with other EU governments and develop projects related to state services that can be paid for with crypto. His experience demonstrates that governmental institutions can benefit from private companies integrating services to help with urgent needs.
From MakerDAO’s experience, Rajiv highlights three waves of institutional use cases for real-world assets in DeFi. The first wave involved working with young innovative companies. The second wave saw regulated financial entities, such as the U.S Commercial Bank, experimenting with DeF. The third wave involved deploying capital from on-chain protocols into the off-chain world. Rajiv also notes the importance of legal frameworks, the need to build more products natively on-chain, and the challenges of bridging traditional finance (TradFi) and DeFi.
Representing Starkware, David shares their experience with Visa. Visa built a proof of concept using account abstraction on StarkNet to turn a dumb wallet into a smart wallet, allowing for recurring payments. The innovation in wallet infrastructure and building web 2.0-like wallets is important for onboarding users and giving enterprises the tools to deliver better user experiences.
Vincent shares Kaiko’s experience with financial institutions on both the buy and sell sides. The company provides benchmarks and prices for investable products, supporting the investment life cycle, tokenizing real assets, and working with regulators to provide reliable data for market surveillance.
Challenges to Bridge TradFi with Web3 Infrastructure?
Rajiv identifies two main challenges: the lack of understanding of on-chain paradigms by large institutions, particularly in legal and compliance departments, and the trust issues in the industry due to the challenging conditions in 2022. As many institutions start to explore Web3, Rajiv thinks that conducting institutional finance on a public blockchain is probably one of the biggest barriers in terms of the effects of privacy and confidentiality.
David also points out two possible challenges for building blockchain solutions for institutional finance: the difficult business model due to smaller volumes and regulatory/legal challenges, and the challenge of creating a real business case for selling to institutional finance.
He thinks that replacing existing institutional infrastructure with blockchain will be slow and selective because it’s really challenging to disrupt a robust and strong system. He believes that it’s important for the industry to identify specific areas where blockchain can make a difference, such as B2B payments.
Vincent thinks education is essential to mitigate institutions’ concerns to move into Web3. He thinks it’s critical to let them understand that it’s possible to deliver secure services on blockchain. The reliability, security, and scalability of blockchain technology should be educated to build trust.
More EBC insight on institutional crypto adoption:
- Tokenization: What Traditional Bankers Have to Say?
- Is Crypto Still Attracting Institutional Money?
- Is Crypto Institutional Lending Facing a Crisis? What’s the Next Wave?
