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DeFi Industry Attracted Into Commercial Banks? Siam bets with a fund of $110 million

While serious institutional interest in crypto is becoming more of an established trend than an emerging narrative, the focus of big-money players is usually on bitcoin (BTC). However, assets such as Ether (ETH) and Decentralized Finance (DeFi) are beginning to attract the attention of major investors.

For Siam Commercial Bank (SCB), DeFi is a key focus point of its current digital asset drive, as Thailand’s oldest bank prepares itself for the expected financial technological disruption of decentralized finance. While other banks are still undecided or are only tentatively negotiating with the digital asset, the SCB says it is looking forward to funding to explore the blockchain and DeFi space.

SCB’s DeFi focus also comes at a time when regulators in Thailand are targeting the decentralized finance space for more stringent regulations. Indeed, regulatory attention is coming in the way of the specific market place, with national and intergovernmental agencies seeking to formulate legal policies for the DeFi market.

DeFi initially promised decentralization; Mediation of the established gatekeepers of global finance. However, with banks and financial institutions investing in decentralized technology, the narrative is moving towards a hybrid form of DeFi, known as regulated DeFi, which combines the existing norms and efficiency of traditional finance, instant settlement and decentralized protocols. Combines the benefits of cost reduction associated with .

DeFi Ambition

Siam Commercial Bank’s $110 million blockchain war chest was launched in February as a $50 million seed fund by the bank’s venture arm, SCB 10X. As Cointelegraph reported at the time, the fund further reinforced the bank’s forward-thinking approach to emerging developments in digital finance.

In conversation with Cointelegraph, Mukaya ‘Tai’ Panich, Chief Enterprise and Investment Officer at SCB 10X, said that DeFi was a revelation of sorts for the bank during his assessment of the emerging digital finance landscape.

“We were working on the blockchain industry and started looking into DeFi. And we were amazed by it,” Panich told Cointelegraph. According to an SCB 10X executive, the bank was quick to spot a potential DeFi technology paradigm shift and potential disruption of traditional financial institutions.

“DeFi projects can be fully automated,” he said, noting that human participation would be limited to smart contract code upgrades. Punich also touched on the revolutionary nature of smart contracts and how lines of code can enable direct transactions between entities such as lenders and borrowers without the need for a central counterparty.

Given the prospect of DeFi retaining its legacy finance position, Panich says banks will do well to prepare for the impending disruption:

“We want to invest in DeFi and be part of the DeFi protocol ecosystem, as we want to understand and leverage DeFi, given its potential to meaningfully impact the financial industry.”

At $110 million, blockchain and DeFi fund SCB is roughly half of 10X’s $220 million venture capital fund. Commenting on the size of the digital asset allocation, Panich said this reflects the bank’s commitment to the DeFi space, adding:

“SCB 10X has invested in and developed a number of collaborative relationships with the blockchain community in Asia and around the world, including Ripple, BlockFi, Sygnum, Alpha Finance Lab, Anchorage, Anchor Protocol (part of Terra Chain), Acceler and App Board, others are included.”

Connected: Thai Bank’s Venture Branch Invests in Institutional Crypto Custodian Anchorage

advancing global finance

In early April, John Whelan, the head of Banco Santander’s blockchain lab in Madrid, made an argument for regulated DeFi. According to Whelan, private layer-two settlement networks for asset classes that run on top of public blockchains are likely to emerge in the future.

According to Whelan, blockchain adoption to reduce transaction settlement throughput is a major focus point for legacy finance stakeholders. Whelan’s comments highlighted the emerging narrative that financial institutions will find means to adopt DeFi technology for their backend processes rather than arbitrage.

Panich echoed similar sentiments, telling Cointelegraph: “I want to point out that I really see a future where traditional finance companies will work closely with DeFi companies. I think that in the future, traditional finance will integrate with DeFi.”

According to the Chief Investment Officer of SCB 10X, banks and financial institutions have the necessary “customer-facing” experience to offer better innovative fintech services to consumers. “In the future, I can see a world where DeFi could power the back-end of traditional finance companies,” Panich said.

For Rashid Ajaja, CEO and co-founder of decentralized capital markets organization AllianceBlock, the promise of legacy finance by DeFi is something that will happen in the long term. However, Ajaja said the short-term trend will see more financial institutions taking advantage of aspects of decentralized finance.

The CEO of AllianceBlock saw parallels with the digital transformation era, which saw the emergence of fintech companies providing services via APIs that interfaced with the banking system. “With DeFi and financial institutions bridging, we will see exactly the same thing, and gradually, legacy systems will change,” Ajaja told Cointelegraph.

“In the long term, I am confident that DeFi will sustain the global financial system as a whole because much of what is done in traditional finance, DeFi has lower costs, fewer middlemen required, new opportunities and increased new revenue streams. Can be repeated with. It’s only a matter of time.”

Craig Russo, director of innovation at non-fungible token vault and marketplace protocol PolyientX, also provided further details on the potential future path for DeFi adoption in global finance. Russo told Cointelegraph that financial institutions will adopt the open-access protocol through initiatives such as Compound Treasury, using DeFi technology within their internal systems.

“A major goal of the DeFi movement is to reform the existing economic system to better align incentive structures, which may be contrary to the interests of some institutions while ultimately opening the door to a new wave of fintech innovation,” Rousseau said. .

Connected: Thailand to target DeFi in latest regulatory clampdown

handling regulatory pressure

As the SCB continues to explore blockchain investment opportunities, authorities in Thailand are shining the regulatory spotlight on DeFi. Back in June, Thailand’s Securities and Exchange Commission (SEC) announced plans to consider licensing arrangements for decentralized finance protocols, specifically token issuance projects.

Commenting on how the bank will handle the increased scrutiny of the DeFi space, Panich said, “SCB 10X aims to operate fully within the regulations set by the government and regulators such as the Thai SEC and the Bank of Thailand.”

“Blockchain and DeFi are very young, emerging and rapidly changing industries. As a TradeFi player operating in DeFi, it is up to us to work closely with the government and regulators to help advance the vision of the DeFi industry. To find out optimal ways to make the industry grow rapidly.

The Thai SEC’s plan to consider DeFi regulations is a sign of the current attention DeFi is receiving by regulators around the world. Also in June, the World Economic Forum released a policy toolkit for fair and efficient DeFi regulations.

The emphasis on fair and efficient regulations may be based on fears that blockchain startups could be at a disadvantage from a compliance standpoint if more stringent measures are implemented on DeFi. It may be easier for regulated entities such as banks and financial institutions to negotiate these policy barriers.

Indeed, AllianceBlock’s Ajaja made the same point, telling Cointelegraph, “DeFi primitives are certainly at a disadvantage in this regard compared to their counterparts in mainstream finance.” Therefore, Ajaja said that the move towards greater compatibility with mainstream finance and interfacing with real-world assets for DeFi primitives requires Know Your Customer and compliant gateways for protocols such as anti-money laundering.

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