Does the DeFi industry absorb commercial banks? Siam bets on 110 million USD fund

Although serious institutional interest in crypto may be becoming an established trend rather than an emerging narrative, the focus of big money players is usually Bitcoin (Bitcoin). However, assets like Ether (Ethereum) And Decentralized Finance (DeFi) began to attract the attention of major investors.

For Siam Commercial Bank (SCB), DeFi is the main focus of its current digital asset drive, because the oldest bank in Thailand is preparing for the expected financial technological disruption of decentralized finance. Although other banks have not yet decided or are only temporarily involved in the interaction with digital assets, Standard Chartered Bank stated that it is keen to invest funds to explore the blockchain and DeFi fields.

SCB’s attention to DeFi also comes at a time when Thai regulators are targeting the decentralized financial sector to implement stricter supervision. In fact, as countries and intergovernmental agencies hope to formulate laws and policies for the DeFi market, regulatory attention is increasingly turning to niche market spaces.

DeFi initially promised decentralization; the disintermediation of the established gatekeepers of global finance. However, as banks and financial institutions invest in decentralized technology, this statement seems to be shifting to a hybrid form of DeFi called regulated DeFi, which combines the existing norms and efficiency of traditional finance, instant settlement and The cost reduction advantages associated with decentralized protocols.

DeFi ambition

Siam Commercial Bank’s US$110 million blockchain war fund started in February with a US$50 million seed fund initiated by the bank’s venture capital arm SCB 10X. As Cointelegraph reported at the time, Fund further strengthened The bank’s forward-looking approach to the emerging development of digital finance.

In a conversation with Cointelegraph, Mukaya’Tai’ Panich, the chief venture capital officer of SCB 10X, said that when evaluating the emerging digital finance sector, DeFi is a revelation for banks.

“We started working in the blockchain industry and started researching DeFi. We were surprised by this,” Panic told Cointelegraph. According to SCB 10X executives, the bank quickly discovered a paradigm shift in potential DeFi technology and the possible disintermediation of traditional financial institutions.

“DeFi projects can be fully automated,” he said, noting that manual participation will be limited to smart contract code upgrades. Panich also talked about the revolutionary nature of smart contracts and how code lines can implement direct transactions between entities such as lenders and borrowers without the need for a central counterparty.

In view of DeFi’s potential to disrupt the traditional financial status quo, Panich said that banks will be prepared for the upcoming disruption:

“The reason why we want to invest in DeFi and become part of the DeFi protocol ecosystem is because we want to understand and use DeFi because it has the potential to have a meaningful impact on the financial industry.”

Blockchain and DeFi funds are worth 110 million U.S. dollars, almost half of SCB 10X’s 220 million U.S. dollars venture capital fund. Commenting on the distribution scale of digital assets, Panich said that this reflects the bank’s commitment to the DeFi field, adding:

“SCB 10X has invested and developed a variety of partnerships with blockchain communities in Asia and around the world, including Ripple, BlockFi, Sygnum, Alpha Finance Lab, Anchorage, Anchor Protocol (part of the Terra chain), Axelar and Ape Board, etc. “

related: Anchorage, the cryptocurrency custodian of the venture capital arm of the Bank of Thailand

Disrupt global finance

Back in April, John Whelan, head of Banco Santander’s blockchain laboratory in Madrid, put forward the argument for regulated DeFi.According to Whelan, a private second-tier settlement network for asset classes running on a public blockchain May appear in the future.

According to Whelan, the use of blockchain to reduce transaction settlement throughput is the main concern of traditional financial stakeholders. Whelan’s comments highlighted an emerging claim that financial institutions will find ways to apply DeFi technology to their back-end processes, rather than disintermediation.

Panich also expressed a similar view. He told Cointelegraph: “I want to point out that I really see a future in which traditional financial companies will cooperate with DeFi companies. My view is that there will be a fusion of traditional finance and DeFi in the future.”

According to the Chief Investment Officer of Standard Chartered Bank 10X, banks and financial institutions have the necessary “customer-facing” experience to better provide consumers with innovative financial technology services. “In the future, I can see a world where DeFi can power the back-end of traditional financial companies,” Panic added.

For Rachid Ajaja, CEO and co-founder of AllianceBlock, a decentralized capital market organization, DeFi’s promise to disrupt traditional finance is a long-term event. However, Ajaja said that short-term trends will include more financial institutions taking advantage of all aspects of decentralized finance.

The CEO of AllianceBlock equated the era of digital transformation with the emergence of fintech companies, which provide services through APIs that interface with banking systems. “As DeFi and financial institutions bridge, we will see exactly the same thing, and little by little, the legacy system will change,” Ajaja told Cointelegraph, adding:

“In the long run, I absolutely believe that DeFi will completely disrupt the global financial system, because everything done in traditional finance can be replicated in DeFi, with lower costs, less demand for intermediaries, new opportunities and new sources of income. Increase. It’s just a matter of time.”

Craig Russo, Innovation Director of PolyientX, an irreplaceable token vault and market protocol, also provided further insights into the possible future path of DeFi in global finance. Russo told Cointelegraph that financial institutions are likely to adopt open access protocols through programs such as Compound Treasury, while also using DeFi technology in their internal systems.

“An important goal of the DeFi movement is to transform the current economic system to better adjust the incentive structure, which may ultimately be inconsistent with the interests of certain institutions, while opening the door to a new wave of financial technology innovation,” Russo added.

related: Thailand will target DeFi in latest regulatory crackdown

Responding to regulatory pressure

As Standard Chartered continues to explore blockchain investment opportunities, the Thai authorities are focusing their supervision on DeFi. As early as June, the Securities and Exchange Commission of Thailand (SEC) Announced a plan to consider the licensing system For decentralized financial agreements, especially projects that issue tokens.

Commenting on how banks will deal with the increasingly stringent scrutiny of the DeFi field, Panich said, “The goal of SCB 10X is to absolutely work within the scope of regulations set by the government and regulatory agencies, such as the Securities and Exchange Commission of Thailand and the Bank of Thailand.”

“Blockchain and DeFi are very young, emerging and rapidly changing industries. As TradFi participants active in DeFi, we have the responsibility to work closely with governments and regulatory agencies to help put forward the views of the DeFi industry, and find a way to promote the rapid development of the industry. The best way.”

Thailand’s SEC’s plan to consider DeFi regulations shows the current global regulators’ attention to DeFi.Also in June, the World Economic Forum Released Fair and efficient policy toolkit DeFi regulations.

The emphasis on fair and effective supervision may be based on concerns that if stricter measures are taken against DeFi, blockchain startups may be at a disadvantage from a compliance perspective. Regulated entities such as banks and financial institutions may find it easier to negotiate these policy restrictions.

In fact, AllianceBlock’s Ajaja made the same point to Cointelegraph. He said: “In this regard, DeFi primitives are absolutely at a disadvantage compared to their counterparts in the mainstream financial sector.” Therefore, Ajaja said that it’s important to understand your customers and counter-attack. A compliance gateway for protocols such as money laundering is necessary to improve compatibility with mainstream finance and move towards Interact with real-world assets For DeFi primitives.