Institutions are taking an interest in DeFi. After several years of disparaging the cryptocurrency ecosystem, the institutions seem to be going backwards. Indeed, the initiatives integrating blockchains public blockchains are multiplying. This time, it’s the Bank of Italy which undertook a project to open up the DeFi to institutions.
The Bank of Italy and its interest in DeFi
In December 2020, the Bank of Italy inaugurated the FinTech Milano Huba technology hub designed to support the digital transformation of the Italian financial system.
Since then, the institution has worked on numerous cryptocurrency-related topics. Recently, the innovation hub announced an project related to decentralized finance. It aims to help financial institutions to learn more about DeFi, particularly in the tokenization of assets.
In this context, the Milano Hub will support the development of the ecosystem known as « Institutional DeFi for Security Token for six months. The aim is to create a platform to help traditional financial institutions experiment with security tokens. It will also facilitate the execution of transactions, using DeFi protocols in a secure and regulated way.
Several banks, asset managers and financial institutions will be taking part in the project. These includeIntesa Sanpaolowhich manages over 975 million euros in assets.
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Polygon and Fireblocks at the heart of the project
Under the hood, this initiative will make use of two well-known ecosystem projects, namely Polygon and Fireblocks. On the one hand, Polygon Labs to accompany deployment of DeFi services on one of its channels. On the other, Fireblocks will offer a on-call service cryptocurrencies for institutions.
The development of the platform will be led by Cetif Advisorya consulting arm of the Certif Research Center at Milan’s Università Cattolica del Sacro Cuore.
« We believe it is essential to create the conditions for DeFi to become a safe and open operating environment for supervised entities. »
Imanuel Baharier, Managing Director, Cetif Advisory
Tokenization in vogue among institutions
As a reminder, the tokenization is the process of converting real-world assets into blockchain-based tokens. This method has the potential toincrease efficiency and reduce coststhroughout the asset’s life cycle.
A development that could reshape the financial landscape over the next few years, as highlighted by a recent Bank of America report:
« We are on the cusp of an infrastructure evolution that could change the way value is transferred, settled and stored across all sectors. »
These initiatives come on the heels of extensive research into central bank digital currencies (CBDCs) around the world. For example, recently, Russia validated a digital ruble projectthe MNBC issued by the Russian Central Bank.
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