Deutsche Bank Crypto Report: The Path to Institutional Decentralized Finance (DeFi)

Original link: https://corporates.db.com/publications/White-papers-guides/the-road-to-institutional-defi

Translation: bocaibocai.eth

Since the Bank for International Settlements (BIS) and the Financial Services Agency of Singapore After the MAS launched the "Financial Internet (Finternet)" and the central bank-led infrastructure Global Layer 1 respectively, the traditional financial field is ushering in a huge change trend: the financial and monetary system is moving toward tokenization. change. Global policymakers, financial institutions and startups have paid unprecedented attention to and researched tokenization, and this topic has become one of the core topics at many important industry conferences.

In addition to the technical process and infrastructure of tokenization, decentralized finance (DeFi), as one of the core innovations in the blockchain industry, has also become a hot topic in the traditional financial field. Therefore, a new concept "institutional DeFi" emerged. Recently, Deutsche Bank published a research report on institutional DeFi, and the author also translated the research report.

Different from native DeFi, which has no access, assets are kept by smart contracts, and are governed by DAO organizations, institutional DeFi emphasizes the custody of assets by regulated financial institutions, KYC/AML through digital identity, and dedicated Organizations and professionals govern. Traditional financial institutions view this regulated DeFi as a new growth vehicle that can reduce costs, increase efficiency, and enhance regulatory transparency.

The article also criticized the "illusion of decentralization" phenomenon in the native DeFi field, that is, holding high the banner of "decentralization" to govern in the name of DAO, but in fact it is extremely centralized, and the right to speak and governance Token are in the hands of a small number of people. The author has long noticed this phenomenon, and most people in the industry have turned a blind eye to it, making it the "elephant in the room." This is something worth reflecting on.

Some people may think that it seems ridiculous that deintermediation DeFi is used to carry out financial business by "removing intermediaries". But if you think about it carefully, take DeFi lending as an example. Lending in native DeFi involves one group of people providing liquidity of the underlying assets to obtain the income from the loaned assets, and another group of people providing mortgage assets and lending the underlying assets in the smart contract. Pay interest. In this process, the intermediary has only been replaced by smart contracts, and its role has changed, but the intermediary has not disappeared. It is not unrealistic for financial institutions to operate DeFi protocols, but it has reduced many labor costs and process.

In fact, no "credit currency" is generated out of thin air in this process. The ability of traditional commercial banks to derive credit currency through credit is something that native DeFi can technically achieve but is difficult to achieve at a commercial level. This involves the credit evaluation of borrowers and a series of social system constraints, which is a governance issue. However, it is almost impossible to carry out unsecured credit lending in DeFi without access, and there is a lack of accountability system and legal constraints for users.

And institutional DeFi is the way to solve this problem. Financial institutions can greatly lower the threshold for enterprises and individuals to participate in finance through regulated DeFi protocols, achieve wider financial inclusion, and reduce costs and increase efficiency. From the perspective of central banks and policymakers, this has a great impact on the entire national society. The economy is a positive thing. This will also be a major trend in the tokenization transformation of traditional financial fields in the future.

To achieve this goal, technology is not the core obstacle, governance and laws and regulations are the key. Today, we can see that more and more central banks and financial institutions have begun piloting a series of tokenization projects and formulating regulatory frameworks. We believe that it is only a matter of time before large-scale applications are implemented.

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Institutional applications of decentralized finance (DeFi) have the potential to create a new financial paradigm based on the principles of collaboration, composability and open source code, And based on an open and transparent network. In this whitepaper, we take a deep dive into the history of DeFi and possible future developments, with a focus on how this impacts institutional financial services.

Foreword

The evolution of decentralized finance (DeFi) and its potential for adoption in institutional use cases has attracted significant interest from industry observers. Proponents see a strong case for the rise of a new financial paradigm based on the principles of collaboration, composability, open source code, and underpinned by open, transparent networks. As a field enters the spotlight, the path to leveraging DeFi for regulated financial activities is under construction.

The changing macroeconomic and global regulatory environment has hindered widespread meaningful progress, with development primarily occurring in the retail space or through incubation sandboxes as a backdrop. However, over the next one to three years, institutional DeFi is expected to take off, coupled with the widespread adoption of digital assets and tokenization, a scenario that financial institutions have been preparing for for years.

This path is driven by advances in blockchain infrastructure, in the form of Global Layer 1 or Interlinking Networks, to accommodate organizations operating under regulatory compliance requirements. Issues resolving key uncertainties are also emerging, including compliance and balance sheet requirements, as well as the anonymity of blockchain wallets and how to meet know-your-customer (KYC) and anti-money laundering (AML) on public blockchains. )Require. As these discussions deepen, it becomes increasingly clear that centralized finance (CeFi) and decentralized finance (DeFi) are not binary opposites; and full adoption on the institutional side of the financial sector may only be beneficial to those in the ecosystem. This is feasible for organizations with a hybrid model of centralized operational governance.

In institutional circles, exploring this space is often positioned as a journey of discovery into an area filled with attractive potential to develop innovative investment products that reach previously untapped new consumers and liquidity pools, and Adopt new digital operating models and more cost-effective market structures. Only time (and innovation) will tell whether DeFi will survive in its purest form or we will see a compromise that allows a degree of decentralization to serve as a bridge to the financial world.

In this whitepaper, we reflect on the recent history of DeFi, attempt to demystify some commonly used terminology, and then take a closer look at some of the key drivers of the DeFi space. Finally, we’ll consider what the institutional financial services community faces on the road to institutional DeFi.

DeFi Landscape Analysis

1.1 What is DeFi?

The core of DeFi is to provide financial services, such as lending or investing, on the chain without relying on traditional centralized financial intermediaries. While there is no official and universally recognized definition in the rapidly evolving space, typical DeFi services and solutions can identify the following elements:

Self-custodial wallets that allow investors to become their own custodians.

Use code to maintain and manage smart contract custody of digital asset custody.

Staking contracts that use code to calculate and distribute rewards based on deposit value and/or variables.

An asset exchange protocol that allows one asset to be exchanged for another and used in lending or decentralized exchanges (DEX), such as Uniswap, one of the early players in the DeFi ecosystem, using smart contract execution trade.

Issue securitization and remortgage structures of different assets based on the underlying "wrapped" assets, where the assets issued can have secondary market value.

1.2 What is Institutional DeFi?

Institutional DeFi - the focus of this article - refers to the institutional adoption and adaptation of DeFi structures, and institutional participation in decentralized applications (dApps) or solutions. By approaching this topic within the regulatory framework of the financial industry, the benefits of DeFi can be transferred to traditional financial markets, opening up possibilities for creating new cost efficiencies and effects, while also paving the way for new growth paths. These new paths include the tokenization of real assets and securities, as well as the integration of programmability into asset classes and the emergence of new operating models.

The difference between institutional DeFi and traditional DeFi is shown in Figure 1.

1.3 DeFi - History

In an open environment, DeFi-related projects inspired the crypto market in the summer of 2020, ushering in a new era. Due to its high liquidity, expensive assets and high mining returns, DeFi quickly rose during the massive quantitative easing (QE) restarted by the Federal Reserve (Fed) in response to the COVID-19 epidemic. The total assets in DeFi services (total locked value, TVL) rose from $1 billion at the beginning of the year to more than $15 billion at the end of the year.

During this period, new DeFi projects received a large amount of financial support, and the number of projects and related tokens was relatively saturated, trying to ride on the momentum. Total DeFi users surged at the end of 2021, with more than 7.5 million unique users transacting in the DeFi ecosystem, a 2550% increase from a year ago, and TVL peaking at $169 billion in November 2021 (based on data from DeFiLlama). New terms and names like Uniswap and Yield Farming were introduced into everyday financial life.

During the year, DeFi experienced its fair share of problems, including some well-publicized crashes, due to multiple interest rate hikes and a significant rise in inflation, along with some bad behavior in the ecosystem. This means that the entire market is forced to take a step back and enter a prudent and rational phase in the second half of 2022.

This trend became even more pronounced in early 2023 as private financing in the Fintech DeFi space dried up as funding costs rose, reflected in a year-over-year decline in deal activity year-to-date (as of Q1 2023, Fintech Global Research) 69%. This caused TVL in DeFi systems to drop to less than $50 billion in April 2023 and to a low of $37 billion at the end of October 2023.

Despite the significant decline and the concurrent "crypto winter" (i.e., the decline in the value of crypto assets), the fundamentals of the DeFi community remain resilient, with the number of users growing steadily, and many DeFi projects persevering and focusing on building products and capabilities. .

At the end of 2023, the market saw growth due to the first approval of a spot crypto ETF product in the United States, widely seen as a major sign of the further integration of digital assets into traditional financial products. More importantly, this opens the door for institutional players to engage more deeply in these emerging ecosystems, which will bring much-needed liquidity to the space.

1.4 Realizing the Early Promise of DeFi

In the native crypto asset space, the DeFi movement has led to coding structures that demonstrate how DeFi can work without the involvement of certain intermediaries, often involving smart contracts and/or peer-to-peer (P2P) Base. Due to low access costs, DeFi services were rapidly adopted in their infancy and quickly proved their value in providing efficient asset pools and reducing intermediary fees, and applying economic behavioral finance techniques to manage demand, supply and price.

These new advantages are realized because DeFi redesigns or replaces existing intermediary activities to be more efficient through smart contract programming, thereby changing workflows and transforming roles and responsibilities. In the “last mile” with investors and users, DeFi applications, or DApps, are the tools that provide these new financial services. Therefore, existing market structures can change.

Pioneering Institutional DeFi Events

There are many institutional use cases that can be extracted from the DeFi space, leveraging the tokenization of real assets and securities.

Here are some examples that try to outline how financial services products combine with technology and regulation to create new value; illustrating why institutional DeFi is attractive.

Case 1: Interoperability, 2023 By using DeFi constructs in the institutional field, self-custody wallets can implement distributed asset custody models while providing comprehensive and independent digital accounts (addresses) that can be used for transaction flow and settlement and reports. An important use is as a smart contract bridge, connecting different blockchains to achieve interoperability and avoid fragmentation caused by blockchain choice.

Applicability: Serves as a connection point between public, publicly licensed, and private networks to minimize fragmentation while allowing a high degree of access and participation.

Example: https://www.mas.gov.sg/-/media/mas-media-library/development/fintech/guardian/interlinking-networks-technical-paper-vfinal.pdf

Case 2: Use Stable Coin refinancing tokenized financial instruments, 2023 DeFi systems can also be used for financing traditional industries, although it has not yet been applied on a large scale. For example, a security token representing some real-world financial instrument can be placed as collateral in a smart contract "vault", earn a stablecoin, and then be converted to fiat currency.

Reference: https://www.sgforge.com/refinancing-dai-stablecoin-defi-makerdao/

Case 3: Tokenized funds in asset management, 2023 Tokenized fund units or tokens can be passed through the zone The blockchain conducts the distribution, opens it directly to accredited investors, and maintains investor records on-chain, while smart contract facilities allow for fast or near-instantaneous subscription and redemption using regulated stablecoins. Further, tokenized fund units representing high-quality liquid traditional financial instruments can serve as collateral.

Example: https://finance.yahoo.com/news/blackrock-launches-first-tokenized-fund-222700828.html?guce_referrer=aHR0cHM6Ly93d3cuYmluZy5jb20v&guce_referrer_sig=AQAAAKT37GXfe84hphq0iMK6yzh8B9rX pnPwpnPonYy1t7sBzLgpCAdM7Lo3TaQqzplg62uy34Nlh0QwotmrfATOLgFLlUWOrM4Jx6Qe_t YFQCjpr-QpS6ZxvYQnBEdUPH-6CKs8nbkAE5BmfHIgpOqxxSbEJEelcA7SBtbiMeDxsokm&_gu c_consent_skip=1720507214

The evolution of DeFi institutional market structure

The market concept powered by DeFi proposes a fascinating market structure that is dynamic and open in nature, and its native design will challenge the norms of traditional financial markets. This has led to divergent opinions on how DeFi integrates or cooperates with the broader financial industry ecosystem, and what form new market structures may take.

2.1 Governance, Trust and Centralization

In the institutional world, there is a greater emphasis on governance and trust, requiring ownership and accountability in the roles and functions performed. While this may seem contradictory to the decentralized nature of DeFi, many believe it is a necessary step to ensure regulatory compliance and provide clarity for institutional players to adapt and adopt these new services. This situation has given rise to the concept of "the illusion of decentralization", because the need for governance will inevitably lead to a certain degree of centralization and concentration of power within the system.

Even with a certain degree of centralization, the new market structure may be less efficient than Our market structures today are much more streamlined because organizational intermediation activities are significantly reduced. As a result, orderly interactions will become more parallel and parallel, which in turn helps reduce the number of interactions between entities. Operational efficiency, reduced costs. Under this structure, administrative activities including anti-money laundering (AML) checks will also become more efficient – ​​as the reduction of intermediaries can increase transparency

2.2 Potential for new roles and activities

The pioneering use cases listed in Section 1.4 of the Institutional DeFi Ecosystem highlight how today’s market structures may evolve the next wave of DeFi innovation

In this way, public blockchain can become the de facto practical platform for the industry, just like the Internet became the delivery infrastructure for online banking. There is already some precedent for launching institutional blockchain products on public blockchains,7 especially in the field of money market funds. The industry should look forward to further developments, for example in the area of ​​tokenization. or virtual funds, asset classes and intermediary services; and/or with a licensing layer.

Participate in the DeFi Market Run on a public, private or permissioned blockchain network

The nature of DeFi itself can be both daunting and compelling for institutions.

Participating, operating and transacting in the open ecosystem provided by DeFi products may conflict with the closed-loop or private environment of traditional finance, where customers, counterparties and partners are all publicly known , risks are also accepted based on appropriate levels of disclosure and due diligence. This is one reason why much of the progress in the institutional digital asset space to date has occurred in the private or permissioned blockchain network space, where a trusted administrator acts as a "network operator" and the owner is responsible for approving participants to enter. network.

In contrast, public chain networks have potential open scale, low entry barriers, and ready innovation opportunities. These environments are decentralized in nature, built on the principle that there is no single point of failure, and user communities are incentivized to "do good". Consensus protocols (Proof of Stake (POS), Work Proof of Work (PoW being the main example) may vary on different chains. This is one way that participants – as validators – can contribute and receive rewards in what we consider the “blockchain economy”.

3.1 Participation Checklist Outline

When evaluating participation in any digital asset and blockchain ecosystem, key considerations should include the maturity of the blockchain and its corresponding roadmap, achievable final settlement Consensus, liquidity, interoperability with other on-chain assets, regulatory perspective, and adoption; also need to evaluate the risks of network technology, network security, continuity plans, and technical standardization of the network’s core community and developer participants. Degree and a common understanding of the taxonomy can also pave the way for the development of applications.

On this basis, private chains appear to be less risky and more attractive than public chains. It should also be measured by factors such as: availability of expertise, vendor dependence, accessibility, liquidity scale, and the cost of creating, maintaining, and running a private chain. These factors may determine the success or failure of a project. Imagine if every Each bank will have to run its own private internet to support its internet banking applications, and cost will be a key factor, especially during the transition period where blockchain will operate in parallel with existing technology stacks. This needs to be considered. Ultimately, businesses must adapt to the level of transparency and new ways of working that they can accept and manage, while maintaining a strong focus on their own and their respective customers’ interests when it comes to data and asset protection, asset custody and security. Custody is critical. The key is to understand novel approaches – such as assets held by smart contracts as an extension of custody – and substantively address the gray areas in these areas, which can help reduce risk and regulatory concerns.

Another example is that identity is very important and in the process of institutionalizing DeFi, deploying verifiable credentials is one of the fundamental elements that will facilitate the governance provided to institutions when participating in these open blockchain ecosystems. Assurance. Verifiable credentials enable anyone to prove their identity using cryptographic proofs without directly sharing personally identifiable information (PII), while storing such PII material off-chain or in an encrypted, decentralized manner for added protection.

Thus, under such digital identities in the “DApps” layer, centralized governance can enable reliable customer due diligence (KYC), sanctions checks and prevention of money laundering in areas such as investor entry and exit from institutional DeFi structures. In addition, trading market abuse detection and other market integrity measures (such as investor suitability) will be new safeguards that can be implemented. Digital identities help identify risk patterns while maintaining transaction confidentiality and banking privacy.

In this way, the core advantages of DeFI in terms of cost-effectiveness and innovative value are retained and converged to bring together certain key attributes in order to successfully achieve regulatory balance.

In recent years, blockchain has been championed for its early development and evaluation in institutions. It is worth noting that the multi-stage industry-level “Guardian Project” was launched in June 2022 by the following organizations. The Monetary Authority of Singapore (MAS) seeks to make progress on the path to institutional-grade DeFi. Develop "open and interoperable" networks and explore the potential of the Internet market.

이는 생태계의 재정적 안정성과 무결성을 손상시키지 않으면서 블록체인 기반 기술을 사용하여 규모, 유동성 및 새로운 시장 연결을 달성하려는 광범위한 산업 혁신 비전과 일치합니다. 감독을 고려하면서 이 목표를 달성하는 방법은 DeFi 기관이 직면한 1조 달러 규모의 문제입니다.

규제 장애물

4.1 중개자가 없는 프레임워크

앞으로의 길이 길고 혁신, 탐구, 검토/반성으로 가득 차 있다는 것은 의심의 여지가 없습니다. DeFi 체제에서는 규제 기관, 표준 제정자 및 정책 입안자가 중개자를 통해 중앙에서 구축되는 전통적인 감독 프레임워크를 재고할 것을 요구합니다. 분산형 시스템에는 규제 및 감독 액세스 포인트가 부족할 수 있다는 점을 감안할 때 DeFi는 확실히 패러다임 전환을 주도하고 있습니다.

4.2 시장 건전성 및 투자자 보호

이 분야의 모멘텀과 관할권 간 진전은 2023년 후반부터 증가해 왔습니다. 12월에 국제증권위원회기구(IOC)는 DeFi에 대한 정책 권장 사항을 발표하여 핵심 위험을 겨냥한 9가지 주요 정책 권장 사항을 설명했습니다. 시장 무결성 및 투자자 보호. 9 이에 앞서 국제증권위원회기구(International Organization of Securities Commissions)는 2023년 11월 DeFi 관련 정책 권고안을 보완하기 위한 '암호화폐 자산 정책 권고안'을 발표했습니다. 상호 운용 가능한 이 두 가지 글로벌 정책 권장 사항을 사용하면 하나의 규범에 구속되지 않는 활동은 다른 규범에 구속됩니다. 10 결과적으로 규제 환경은 이제 더욱 명확해졌으며, IOSCO의 권장 사항이 회원사에 의해 전 세계적으로 구현됨에 따라 더욱 명확해질 것입니다.

이 명확성은 동일한 활동, 동일한 위험, 동일한 규정 및 기술 중립성에 대한 글로벌 규제 원칙에 의해 주도됩니다. 이는 토큰화된 전통 금융상품이 단지 토큰화되었다는 이유만으로 다르게 취급되기보다는 금융상품으로서의 성격에 따라 규제되어야 한다는 것을 의미합니다. 토큰화는 기술적 프로세스이므로 기존 기술 위험 규정이 적용됩니다. 신기술에 노출된 금융 기관의 자산과 부채 관리는 해당 기술의 고유한 특성에서 발생하는 위험을 어떻게 이해하고 계산하는지에 따라 점점 더 많은 영향을 받고 있습니다.

4.3 신중한 대처

디지털 자산 공간 참여가 대차대조표에 미치는 영향은 규제 진화 측면에서 또 다른 과제입니다. 은행의 암호화폐 건전성 처리에 관한 바젤 위원회(BCBS)의 최종 기준도 2023년 12월에 공개되어 논평을 받을 예정입니다. 암호화폐 자산 관련 활동(본질적으로 DeFi 포함)에 내재된 시장, 신용 및 유동성 위험을 인식하고 공개 및 필수 보호 조치를 정의함으로써 요약되는 시장 혼합을 인식하는 데 초점이 맞춰져 있습니다. 바젤 위원회의 표준은 또한 관리해야 하는 기본 위험을 반영하는 분류 기준에 따라 자산 유형을 그룹 1과 2로 광범위하게 그룹화해야 할 필요성을 다루고 있습니다. 바젤협정에 따른 공개 요건에 대한 또 다른 협의는 2024년 1월 31일에 종료됩니다. 가장 최근인 2024년 5월 16일 바젤위원회는 시행일을 2026년 1월 1일로 1년 연기하겠다고 발표했습니다. 이러한 상황에서 기관 DeFi가 어떻게 분류되는지는 실질적으로 조사되어야 합니다.

이것은 업계의 발견 여정에서 중요한 이정표입니다. 이는 시장과 기술이 함께 발전함에 따라 추가 발전을 위한 길을 닦을 수 있는 합의된 해석을 이해하고, 토론하고, 조정하고, 도달하기 위한 수년간의 집중적인 공동 공공 부문 및 업계 옹호 작업의 정점입니다. 참여와 관련된 위험을 포함하여 새로운 디지털 영역을 고려하는 방법에 대한 이해를 확립하고 조화시키는 것은 규제 명확성을 높이는 동시에 혁신을 위한 중요한 기반이자 보호책이 될 것입니다.

많은 사용 사례는 적절한 규제와 결합된 혁신적인 기술이 비즈니스 모델과 시장을 변화시키고 재구성하고 재정렬하는 데 매우 강력한 힘이 될 수 있음을 보여줍니다.

5.DeFi: 다음은 무엇일까요?

전구는 양초의 지속적인 개선이 아니라 왁스 양초의 단점을 해결한 대체 기술의 지속적인 개선에서 진화했습니다.

위의 질문에 대해 생각하고 광범위하게 규제되거나 제도화된 DeFi 버전의 잠재적 힘을 믿는다면 생태계 구조를 구축하려면 일련의 핵심 원칙, 표준 및 전제 조건이 필요하다는 점을 인정해야 합니다. 실제로, 그래야만 기관 관계자들이 이를 새로운 성장 도구로 수용하고 충분한 보호 장치와 규제 확실성을 갖고 앞으로 나아갈 것입니다.

2024년은 모든 형태의 DeFi에 격동의 시기가 될 것이며, 그 후 2024년은 결정적인 순간이 될 것입니다. 규제의 시행은 디지털 공간에 대한 제도적 관심과 채택 속도를 지속적으로 결정하는 원동력입니다. DeFi는 위험 관리, 자금 세탁 방지 및 정보 개인 정보 보호 문제를 확장한다고 말할 수 있습니다. 그러나 금융 포용을 포함하여 기관 DeFi가 제공하는 기회와 함께 고려할 때 미래의 디지털 우선 금융 산업에서 새로운 제품, 새로운 서비스 및 새로운 운영 모델에 가져올 잠재적인 이점을 무시하기는 어렵습니다.

기술 자체가 성숙해지고 있으며, 기술에 대한 사람들의 이해도 점점 깊어지고 있습니다. 규정은 점점 더 명확해지고 있으며, 조종사로부터 교훈을 얻으면서 이제 필요한 전문 지식을 얻는 것이 더 쉬워졌습니다. 예를 들어 규정 준수 및 감사와 같은 통제 기능에 대한 규제와 전문성이 강화되면 금융 산업에 DeFi 기술을 도입하는 데 도움이 될 수 있습니다.

업계는 현재 "개념 증명 이후" 단계에 있으며 눈에 띄고 성공적인 "라이브" 제품을 대규모 상용 제품으로 업그레이드해야 합니다. 이러한 변화는 비용 효율성 또는 새로운 성장을 달성하고 더 나아가는 데 도움이 될 것입니다. 제도적 발전은 이 기사에서 다루는 요소가 규제된 DeFi에 대한 제도적 참여의 개발 궤적에 어떤 영향을 미치거나 억제하는지 지켜볼 것입니다.

교차 체인 상호 운용성, 오라클, 디지털 또는 분산형 ID 솔루션 및 트러스트 앵커 등의 측면에서. 핵심 분야에서 기술, 혁신 및 규제가 지속적으로 성숙해지면 임계 질량에 도달하는 데 필요한 채택 추진력이 더 커질 것입니다. 우리를 새롭고 매혹적인 목적지로 데려가는 흥미진진한 여행.

The above is the detailed content of Deutsche Bank Crypto Report: The Path to Institutional Decentralized Finance (DeFi). For more information, please follow other related articles on the PHP Chinese website!