03/09/2024
Crypto Is Now a Non-negotiable for Traditional Banks
Traditional banks have long been wary of crypto and DeFi, but thanks to increased regulatory clarity, endorsements from TradFi heavyweights and growing client demand, it’s clear that crypto is here to stay.
What can banks do?
Many banks are realizing that crypto is more than just a new asset class. For them, it’s an opportunity to retain and attract clients who are drawn to crypto’s higher returns and diversification opportunities. Here’s a few things to consider:
Diversify product offerings: Banks can defend their current assets under management, diversify their offerings and win new business by attracting the next generation of crypto-native clients.
Staking-as-a-service: Banks can leverage their trusted infrastructure to offer customers new revenue streams. By working with the right technology partner, staking can be offered to both institutional and retail clients.
Tokenization: Tokenized products backed by real-world assets can offer new revenue streams and unlock markets that were otherwise limited.
Blockchain-powered settlement: Blockchain-powered, multi-asset settlement networks can help banks meet and exceed the T+1 settlement standard that many major players struggle with.
CeDeFi – a likely scenario
For now, DeFi products will continue to compete with traditional products, but it is likely that the two will blend at some point. By leveraging DeFi’s technical components and CeFi’s KYC and AML requirements, we are looking at “CeDeFi”-based models becoming the most appropriate form that will be the underlying infrastructure of future finance.
Banks should take advantage of DeFi’s features, offering flexibility, more efficient systems and innovative financial products that can offer customers new opportunities for yield.
At the same time, TradFi or CeFi, brings hundreds of years of experience in financial systems governance and customer servicing, providing the necessary protection and guardrails needed to bring institutional clients and a new wave of customers onboard.
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