DeFi Archives - European Blockchain Convention | 24-26 Oct 2023

When DeFi meets TradFi: Alliance of MakerDAO and Societe Generale-FORGE

June 1, 2023 by SzuTung Chen

Rajiv and Sylvain share their insights on DeFi and TradFi at EBC23.

Rajiv Sainani, Head of European Business Development of MakerDAO, and Sylvain Prigent, Chief Product Officer & Co-founder of Societe Generale-FORGE shared their unprecedented journey of innovative collaboration. Read on to learn what happens when DeFi meets TradFi!

Rajiv starts the panel by saying that the future of finance will be traditional finance (TradFi) and decentralized finance (DeFi) coming together. MakerDAO has been cooperating with Societe Generale-FORGE to issue security tokens for more than a year. In this panel, Rajiv and Sylvain share their experience, learnings, and challenges along this incredible journey.

The collaboration started when Societe Generale-FORGE proposed to issue a native blockchain-based security token on the Maker public forum in September 2021. Their main goal was to bring liquidity to security tokens and they partnered with a DeFi protocol, Maker, to find an innovative solution.

The technical integration was fast and smooth, but the real challenges lay in the governance of a decentralized autonomous organization (DAO) and the legal processes. Know Your Customer (KYC) and jurisdiction were necessary, and the team had to find solutions and educate the regulators along the way.

Watch the full panel to learn more about MakerDAO and Societe Generale-FORGE’s unprecedented collaboration!

Amazing Things Happen When DeFi Meets TradFi

Regarding the next steps, Rajiv and Sylvain both hope to scale up the collaboration and bring the project to the next level, rather than simply experimenting. Societe Generale-FORGE is planning to open this service to many of its investors through Maker by the end of 2023 or in the first quarter of next year. They believe that both the TradFi players and the MakerDAO community can benefit from this project.

Throughout their cooperation, Rajiv thinks the key to the success of a TradFi-DeFi project is to have people that can navigate successfully both worlds and find the synergies. It’s easy to imagine a financial space when these two worlds collaborate, but the process is not only rainbows and unicorns.

Rajiv acknowledges the difficulties for a DeFi to cooperate with a TradFi. Therefore, he hopes their collaboration can pave the way for other projects as they have proved to the world that despite having different cultures, ideologies, and processes, TradFi and DeFi can work together to create something amazing!

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The Potential of Stablecoins and the Impact of MiCA Regulation

May 30, 2023 by SzuTung Chen

Panelists in this stablecoins discussion include Yves-Michel Leporcher, lecturer at European Tech School, Ewoud Barink, Business Development Director at Worldpay, Avishkar Sharma, Head of Crypto Partnerships at Checkout.com, Teana Baker-Taylor, VP of Policy & Regulatory Strategy at Circle, and Radoslav Albrecht, Founder & CEO of Bitbond.

Stablecoins are one of the intense focus areas in the Markets in Crypto Assets (MiCA) Regulation that just got approved by the European Parliament in April 2023. In spite of the restrictions that MiCA may impose on the issuance of stablecoins, experts at the 8th European Blockchain Convention still support the merits of stablecoins and express optimism about the unlimited financial potential that stablecoins unlock.

Not All Stablecoins Are Created Equal

In the wake of Terra’s collapse in 2022, Teana states that the term “stablecoins” is misleading. She prefers to use different terms to refer to this asset based on its stabilizing mechanisms, such as tokenized cash, e-money tokens, or asset-referenced tokens.

The term stablecoin is terrible. We should stop saying it. It infers that a lot of different types of assets are similar and I think last year has shown us that not all stablecoins are created equal.
– Teana Baker-Taylor, VP of Policy & Regulatory Strategy at Circle

Teana from Circle shared her opinion on stabecoins at the 8th EBC.

Stablecoins Are Here To Stay

Stablecoins unlock endless possibilities for the financial world, especially for the unbanked that have long been excluded from the financial systems. Radoslav foresees a future where 40% of the total payments volume is very likely to be transacted in stablecoins.

They believe that the adoption of stablecoins is not cannibalizing the current financial markets but creating a bigger ecosystem that brings in people that have long been excluded from financial institutions. It unlocks a more inclusive financial world, as Teana states, “This is new economic activities, it’s not replacing or eating anyone’s lunch.”

Due to its open-source characteristics, experts highlight how stablecoins provide access to a new rail that can easily integrate with traditional banking infrastructure while offering constant upgrades.

Yves-Michel, lecturer at the European Tech School, moderated this panel of stablecoins.

Regulatory Challenges and the Impact of MiCA

During the 8th European Blockchain Convention, the panelists discussed the challenges of regulations in shaping the future of stablecoins. The focus was on MiCA, which has emerged as a prominent regulatory topic.

MiCA aims to bring an end to the unregulated crypto market in Europe. Under MiCA, stablecoins are classified as either e-money tokens or asset-referenced tokens. While stablecoins are not banned, MiCA sets essential rules such as the requirement for private stablecoin issuers to maintain appropriate minimum liquidity as a reserve.

Teana emphasizes the value of establishing standards through MiCA. Sharma shares the aspiration for global consensus among regulators, even though it may seem like an ambitious utopian dream.

Regulations provide clarity and comfort for institutions to step into the crypto ecosystem. However, Teana highlights that while MiCA exists as a regulatory framework on paper, its implementation is pending, leaving many aspects yet to be resolved.

Click here to read more about MiCA and its impact on the crypto industry!

EBC panelists discussed MiCA and the future of stablecoins.

The Evolving Landscape of Stablecoins

According to Radoslav, the future holds a lot more use cases for stablecoins. Their usage will extend beyond payments and remittances as institutions will also utilize them to make transactions. Both B2B and B2C sectors are expected to embrace stablecoins in the years to come.

Radoslav also anticipates the increasing emergence of non-fiat-based stablecoins, pegged to a diversified basket of assets. This approach aims to safeguard the purchasing power of the currencies. He emphasizes the need for competition to determine the optimal combination of assets that form the basket.

Teana acknowledges the inherent unpredictability of the market’s future. However, she highlights that the introduction of asset baskets will introduce complexity to stablecoins. Ultimately, the success of stablecoins will come down to their use cases and under what scenario are they designed to be used.

Watch the full discussion to understand the potential of stablecoins!

The Future of Crypto Market-making: What’s the Role of Regulations and AI?

May 14, 2023May 11, 2023 by SzuTung Chen

The increasing adoption of artificial intelligence (AI) and the ongoing discussions surrounding regulations are two important factors shaping the future of crypto market-making. How will policymakers’ decisions affect the crypto industry? How is the crypto industry using AI?

A very enlightening discussion took place during the 8th European Blockchain Convention with Joseph Hall, Reporter at CoinTelegraph, Guilhem Chaumont, Co-Founder & CEO at Flowdesk, John Murillo, Chief Dealing Officer at B2Broker, Patrick Heusser, Chief Commercial Officer at Crypto Finance AG, Stef Wynendaele, Head of Commercial Strategy at Keyrock, and David Tunian, Head of Business Development at WhiteBIT.

How Is Crypto Market-making Different From TradFi?

In a cocktail party analogy, market makers are the party planner that manages the risks, provides the necessary support for participants to enjoy themselves, and handles the logistics of the event. They play a crucial role in maintaining order and stability in the market.

Market makers in the crypto industry are more open, transparent, and willing to cooperate compared to players in traditional finance. In TradFi, market makers operate in a highly competitive and fast-paced environment where speed determines performance. However, the crypto market is more decentralized and fragmented. Crypto market making is often offered as a service and the risks are shared among several different stakeholders. Market makers need to collaborate to manage risks and advance the market.

“I’d rather have a collaborative approach and not an “Us v.s.Them”. At the end of the day, the market will decide what is most efficient and the market will decide what’s most interesting to have on the balance sheets. So let the market decide, but we have to do it together!”
– Stef Wynendaele, Head of Commercial Strategy at Keyrock

The panel “Market Making is Key for a Crypto Market Recovery” at the EBC23.

Regulations Can Help Bring the Industry Forward

All panelists acknowledge the importance of regulations, but clarity, transparency, and optionality are the key elements that they hope regulations can bring.

“I’m actually looking forward to regulation and clarity. It will at least be clear about what are the rules and the boundaries. It will help the market be more liquid and more people be comfortable going in. I’m really looking forward to it!”
– Patrick Heusser, Chief Commercial Officer at Crypto Finance AG

Despite being supportive of regulations, Patrick believes that there should be two parallel ecosystems in the crypto industry. One is the decentralized ecosystem where users can trade any token without restrictions. The other is a system for users who may not want to manage their wallets. He envisions that the decentralized system will be the innovative one that helps make the traditional system more efficient.

“In the end, it would be very Darwinian. The actors that are bad and not transparent will be mechanically excluded from a business perspective and those who bring value will obviously have more business and they will make progress.”
– Guilhem Chaumont, Co-Founder & CEO at Flowdesk.

Click here to read more about MiCA and regulations at EBC!

How Are Market Makers Approaching AI?

When looking at the quantitative market-making and technical perspective, a lot of machine learning and AI technologies have been implemented for years.

Patrick also views AI as a potential support for crypto businesses as the technology can be used to follow updates on multiple protocols, monitor blockchains, and evaluate risks in smart contracts, which are time-consuming and challenging if done manually.

However, Guilhem thinks it’s very unlikely that AI will disrupt the crypto market-making in the next five to ten years. The crypto market is heavily fragmented and there’s a lack of ground infrastructure and a high necessity for less scientific discussion and cooperation, so he thinks it’s hard for AI to make groundbreaking innovations in the short term.

Watch the full panel to learn more about the future of crypto market-making!

DeFi Or New Ways of Blockchain Implementation: What Will Lead The Next Bull Run?

May 14, 2023May 9, 2023 by European Blockchain Convention

On the 16th of February, a panel discussion of the participants of the European Blockchain Convention 2023 took place on the topic “Why market-making is key for a crypto market recovery.”

The panelists discussed the crucial role of market-making in the crypto market’s recovery, highlighting the challenges and opportunities that come with this practice.

WhiteBIT is one of the largest centralized cryptocurrency exchanges in Europe, with 3.5 million customers worldwide, has shared its insights and opinion with us on the following questions:

What is the difference between a CEX and a DEX?

CEX, or centralized exchange, is a traditional exchange operated by a centralized authority. It acts as a middleman between buyers and sellers, holding users’ funds in its custody.

DEX, or decentralized exchange, is a newer exchange built on a decentralized blockchain network. Unlike CEXs, DEXs do not rely on a central authority and instead use smart contracts to execute trades directly between users. This means that users remain in control of their own funds at all times. DEXs often have lower trading fees and are less susceptible to hacking attacks, but they may have lower liquidity and a less user-friendly interface than CEXs.

With the rise of decentralized exchanges, what do you see as the value proposition of centralized exchanges in the crypto ecosystem?

Despite the growing popularity of DEXs, CEXs still play an essential role in the cryptocurrency ecosystem and offer several unique value propositions.

While DEXs are decentralized and do not have a central point of failure, they are not immune to security risks such as front-running attacks, smart contract vulnerabilities, or malicious actors. On the other hand, centralized exchanges typically have more sophisticated security measures in place, such as multifactor authentication and cold storage.

Besides, centralized exchanges have a more user-friendly interface and offer more advanced trading tools than DEXs, making them more accessible to novice traders.

Moreover, CEXs are subject to regulatory oversight. They must comply with KYC/AML requirements, making them a more attractive option for institutional investors and traders who require high compliance.

Do exchanges need licenses to operate in every country they offer their services?

Exchanges must comply with the licensing requirements in the countries where they operate to avoid legal and regulatory issues. Failure to do so could result in fines, legal action, and reputational damage.

Is KYC a must or a plus for exchanges? Should DEXs include KYC?

Whether KYC is a must or a plus for exchanges depends on several factors. For example, the regulations in the exchange’s jurisdiction, risk tolerance, and customers’ preferences. First of all, the KYC implementation regulates the requirements and protects the exchange from unscrupulous users.

As for DEXs, there is no clear consensus on whether they should include KYC. Some proponents of KYC argue that it can help to prevent illicit activities on DEXs and promote the adoption of DEXs by more traditional financial institutions. Others, however, believe that KYC goes against the fundamental principles of decentralization and user privacy that DEXs were designed to uphold.

Is there any insurance to protect retail investors operating on an exchange, as we may find in TradFi?

There is not a widely recognized or regulated insurance scheme for digital assets that could offer retail investors the same level of protection as in traditional markets. While some exchanges may offer their insurance policies or other forms of protection, these are generally subject to a different level of oversight or regulation than traditional finance.

As a result, retail investors should be aware of the risks involved and take steps to protect themselves. It can be performing their own due diligence on the exchanges they use, using strong security measures to protect their assets, and diversifying their holdings across multiple exchanges and assets.

Do you have any advice for retail investors?

We don’t provide trade advice, but there are some basic hints for retail investors:

1. DYOR

Before investing in any asset, it’s essential to do your own research and understand the risks involved. Don’t rely solely on the advice of others, and be sure to verify any information you receive.

2. Diversify your portfolio

Don’t put all your eggs in one basket. Diversify your portfolio across different assets and asset classes to spread your risk and increase your chances of success.

3. Invest what you can afford to lose

Investments always come with risk, so it’s essential only to invest money you can afford to lose without causing significant financial hardship.

4. Use strong security measures

Keep your assets secure using strong passwords, two-factor authentication, and other security measures. Don’t share your private keys or additional sensitive information with anyone.

5. Be patient and disciplined

Investing is long-term, so don’t expect to get rich overnight. Stick to your investment plan, be patient, and don’t let short-term market volatility or hype influence your decisions.

6. Keep learning and stay informed

The cryptocurrency and blockchain industry constantly evolves, so staying informed about the latest developments and trends is essential. Keep learning and improving your knowledge to make informed investment decisions.

Investing can be risky. However, it can also be rewarding for those who approach it with caution and discipline.

It was first cryptos, then NFTs, and followed by Metaverse. What is the booster of the next bull run?

The market is volatile and unpredictable. Hence, it is difficult to forecast which assets or technologies will become the focus of attention. However, some potential areas of interest for investors and traders include decentralized finance (DeFi) applications, blockchain-based gaming, and other innovative use cases for blockchain technology. Ultimately, the next booster of the next bull run will depend on various factors, including market sentiment, technological developments, and macroeconomic conditions.

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Watch the panel “Why market-making is key for a crypto market recovery” to learn more about crypto market-making.

Is Crypto Institutional Lending Facing a Crisis? What’s the Next Wave?

May 14, 2023May 9, 2023 by SzuTung Chen

Jamie Knowles, Director of Institutional Sales at Galaxy Digital, and Leeor Groen, Managing Director at The Spartan Group discuss the crypto’s institutional lending market. They identify the challenges and opportunities of the current crypto lending markets and how to restore trust and reduce counterparty risks in the ecosystem.

Failure of Actors Doesn’t Mean Failure of Crypto

Institutional lending in crypto has rapidly evolved in the past two years, with a growing willingness to use collateralized or uncollateralized lending products. Despite challenges faced in 2022, Leeor believes that it is not a failure of crypto or the ecosystem, but the failure of malicious actors.

The technological foundation that allows users to participate in decentralized finance (DeFi), borrowing, and lending pools has stood the test of time and remains resilient. In his opinion, the industry hasn’t experienced a technological implosion.

How to DYOR when investing in crypto? Read more to find out!

Jamie and Leeor discussed the crypto’s institutional lending market at the EBC23.

Restore Trust & Reduce Counterparty Risks Are Essential

Jamie identifies the huge counterparty risks in the industry over the past 12 months. There has been a significant drawdown in institutional loans on a notional basis. Both the demand and supply side of institutional lending in crypto has decreased due to the exit of some of the biggest players and many potential lenders.

Remaining lenders have become increasingly worried about counterparty risks and have pulled back significantly. They start to demand high collateralization levels that many borrowers are not willing to meet.

Jamie shared his insights on the institutional lending market at EBC23.

Leeor thinks that the industry needs to implement proper due diligence processes and standardized frameworks to evaluate counterparty risks. This includes asking fundamental questions about who the counterparty is, how many other people they are taking money from, and what their track record is.

Standardization of diligence processes will ensure that all parties are on the same page and will reduce the likelihood of surprises. Leeor believes that by building connections, the industry can create critical infrastructure pieces that will be the foundation of the next wave of growth.

To restore trust in the ecosystem, Jamie thinks that the market needs time to recover. It’s important to implement better risk management practices and improve infrastructure for real-time monitoring. Zero-knowledge (ZK) technology is a potential technology to protect privacy.

Jamie and Leeor held an insightful panel about the institutional lending market at EBC23.

Bringing Institutional Players Into Crypto Lending

Leeor believes that lending and borrowing in DeFi is still in its infancy, but there is potential for significant growth. He thinks that the composability of liquidity is one of the biggest enablers to unlocking assets flowing into the crypto space.

To bring traditional financial (TradFi) institutions to participate in DeFi, Leeor suggests that the basic infrastructure needs to be developed to allow them to participate in a meaningful way.

Watch the full panel to learn more about crypto’s lending market!