DeFi Instead of CeFi?

Turnover in DeFi ecosystems is comparatively small and volatile. In 2023, approximately 100 billion US dollars were traded worldwide via DeFi protocols. The current market leader in this dynamic environment is the open-source blockchain platform Ethereum, which is run by a non-profit foundation based in Switzerland. With a market capitalization of around 12 billion Swiss francs, it is followed by US-based Avalanche. Experts believe that new market players and use cases will emerge and that DeFi has immense potential. Although the “money side” of DeFi transactions is often a cryptocurrency, there are also stablecoins or tokenized assets whose value represents traditional shares, bonds, indices, commodities, or currencies. These serve as a bridge between the cryptocurrency and traditional financial worlds.

The risks associated with crypto markets are numerous and include volatility, security concerns, and the regulatory environment. This is still in its infancy and varies greatly from region to region. While the USA is still looking for clear guidelines, the EU has introduced some regulatory approaches. For example, the banking supervisory authority has published anti-money laundering guidelines that will apply from 30 December 2024. These also affect DeFi and are aimed at regulating hosted wallets, for example. Switzerland is taking its own path and pursuing an open approach. The Swiss Financial Market Supervisory Authority FINMA handles DeFi requests taking into account the existing rules, abstracting from specific technologies or processes, and applying the same rules as for intermediaries in the traditional financial market. This pragmatic approach has made Switzerland an attractive location for DeFi projects and promotes innovation in the financial sector.

Gabriel Juri
SIX