“We’re Ready for Decentralized Finance,” Claim Traditional Financial Service Institutions
Confidence in DeFi rises but fears over security and lack of regulation could derail progress, according to new study by BCG Platinion and Crypto.com.
London, 22 October 2020: Decentralised finance (DeFi) is now being taken seriously by traditional finance. In a European-wide survey of financial institutions spanning across insurance, banking, and trading, 86% are implementing or assessing services built on a DeFi framework.
Of those companies, 31% are reporting an enterprise-wide rollout or have deployed use cases of DeFi. Additionally, 58% of companies are concerned they will lose a competitive advantage by ignoring DeFi instruments.
From the companies implementing decentralized finance, 35% are collaborating with an existing consortium, platform, application, or service. 24% are developing their own consortium or platform and 22% are going to collaborate with competitors because the current ecosystem is not compatible with their requirements.
The research, conducted by BCG Platinion (part of Boston Consulting Group) and Crypto.com, analyses the uptake of decentralized services amongst traditional financial institutions. From 400 companies across Europe, 71% with a turnover or balance sheet above £10bn assessed or implemented DeFi, compared with 51% of companies turning over less than £100m.
Of companies assessing or implementing the blockchain technology, 42% are pivoting to a more decentralized approach to asset management. 38% of companies are using it to facilitate faster, more secure, payment processing services, rising to 61% for the biggest companies.
Conversely, 70% believe security concerns over fraud is a challenge preventing company-wide adoption of DeFi, and 15% of decision-makers strongly believe that whilst decentralized finance is a threat, their companies are against its adoption.
The research also considered the impact DeFi will have on business and operating models and 59% of companies say they will have to implement a new governance structure. But 70% of companies say restructuring the business model or decoupling decentralized finance will increase the speed and lower the cost for financial transactions. 67% said it would open up new revenue streams and 61% said they believe smart contracts are an important business driver for considering or adopting DeFi as a way to execute financial services.
At the same time, a lack of regulation is a challenge for 61% of companies, increasing for companies with a larger turnover or more assets under management. That decentralized finance is over collateralized is also a concern for investment bankers and asset managers, more so than other areas of finance. And sharing their anxiety with a recent FCA announcement, 60% of companies are worried about a lack of recovery mechanisms.
Kris Marszalek, Co-founder, and CEO of Crypto.com said,
“The research shows that DeFi’s adoption is not limited to just the blockchain industry; traditional financial institutions of all sizes are viewing DeFi not as a competitive threat but rather as a valuable instrument to delivering more decentralized, efficient financial services. This is shown in their warming attitudes towards DeFi and its integral role in future plans for the vast majority of them.”
Kaj Burchardi, Managing Director of BCG Platinion, adds,
“As markets evolve towards decentralisation, there will be a growing demand for approaches like DeFi which can provide a more efficient and more open way of banking, trading and investing.”
“It is encouraging to find that financial institutions are already seriously, and strategically, collaborating with the crypto community to begin building a new generation of governance and technologically resilient solutions that will make financial services more accessible.
However, there is still quite some progress to be made in order to bring DeFi into the mainstream especially in security and compliance.”
The survey was conducted by Sapio Research interviewing 411 decision-makers with familiarity over decentralized finance and follows up a report highlighting the challenges and opportunities for financial institutions adopting decentralized finance.
Crypto.com was founded in 2016 on a simple belief: it’s a basic human right for everyone to control their money, data, and identity. Crypto.com serves over 5 million customers today, providing them with a powerful alternative to traditional financial services through the Crypto.com App, the Crypto.com Card, the Crypto.com Exchange, and Crypto.com DeFi Wallet.
Crypto.com is built on a solid foundation of security, privacy, and compliance and is the first cryptocurrency company in the world to have ISO/IEC 27701:2019, CCSS Level 3, ISO27001:2013 and PCI:DSS 3.2.1, Level 1 compliance. Crypto.com is headquartered in Hong Kong with a 600+ strong team. Find out more by visiting https://crypto.com
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