Who will win, DeFi or CeFi?

David Bradley-Ward
Published in
7 min readFeb 2, 2022


In the war between centralisation and decentralisation, crypto currencies and security tokens, there is much at stake for the winner. Is it a war and if so, how will it end?

This seems to be a question that is asked by the extremes of the digital asset community. The DeFi maxis are convinced that the way forward is a decentralised financial system with no boudaries other than computer code protecting the community from bad actors. The CeFi maxis believe that crypto has gone to far and it needs to be brought under a regulator framework or the current financial system will suffer and geopolitical problems will occur.

In a way, both are right and here is why.

  1. The current system is broken.
Photo by Elisa Ventur on Unsplash

Anyone who suggests that the current financial system is fit for purpose in the world we currently live in is either a) making plenty of bank from the status quo or b) a right leaning politician, probably making bank from the status quo or c) as mad as a box of frogs in the summer heat.

The reason crypto has flourished is because of all the the things that are wrong with the current system. As an example, at the most basic level it is ‘access’. What I mean is access to products and financial innovation. The regulators have done a great job over the years of forcing everyday investors out of, what they perceive as, ‘risky’ markets. Many of the innovative financial investments, therefore, have been exclusively available to the wealthy and sophisticated investors.

I reviewed an investment proposal from a private bank that paid 25% for 12 months lock up of cash AND the bank would lend against the portfolio value at 0.7% p.a as leverage. So a £100k investment with another £100k leverage from the bank would pay 50% on my capital. The risk? If Facebook, Amazon and Netflix shares fell 25% I would be obliged to buy them. What is the downside of owning those shares at 25% discount from the current price.

The regulators would deem that too complicated for your avarege investor, therefore there is no access. Is that right?

We can argue all day long about whether this it is a good idea to shield investors from products. Personally I think that it should be by choice. The crypto markets have flourised because the regulators have not been involved and as such have been able to innovate products where investors are making good returns. Of course there is risk, but when does the nanny state kick in? I have known plenty of rich people, who would qualify for any products they want to buy and but are about as finacially savvy as an omlette. The regulator says that they can afford to lose money so it’s OK.

The simple fact is, it is not the 1980s anymore. The internet is awash with tools such as Youtube and specialist platforms etc to learn about financial products and innovations, so rather than a blanket ban on certain products for certain people, why not have a test to pass for assessment of knowledge? Surely that is fairer system?

Access is just one of the areas where the current system doesn’t work for everybody, that is before you get started on hedge funds, high frequency trading, the banking system printing money, government stimulation cash, political interference with markets, inside information and the banking monopoly on moral hazard.

2. DeFi is not going away

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The innovation in the space is awesome. Every conference I go to is more exciting than the last. Yes, some of the ideas are stark raving bonkers and probably dangerous, but some are so innovative and creative that I get pangs of jealousy that I didn’t think of it.

With proof-of-stake networks you can stake your crypto and get a return on your cash far higher than what you would be able to achieve in the fiat currency world. This innovation is awesome. Yes, you have exposure to the underlying fluctuations (sometimes wild) of the crypto you are staking, but if you are in a decent project and you have a long term time horizon then it beats out the banks by a country mile. See Crypto.com, Binance, Compound, Coinbase etc.

For example I am in TrueGBP, a stable coin (i.e backed by GBP), and have locked it up for 3 months to acheive 10% per annum. Impossible from a bank, and yet the reglators class this as ‘risky’. They can’t stop you at the moment because the asset is unregulated, but believe me, they will try.

The eco system that is buidling up in DeFi is incredible, the talent in the space is mind blowing and the money is growing all the time. DeFi is here to stay, but there are existential threats to its growth and that is where CeFI comes in.

3. DeFi is the rails CeFi is the train.

Photo by Balazs Busznyak on Unsplash

When presenting an internet busines these days, nobody goes into the explanation of hypertext transfer protocol, or TCPIP or any of the other myriad of intracasies that make up the internet and maybe that is where DeFi ad CeFi are going.

You cannot run a financial system without regulation. I am no fan of the UK regulators. I accept that they are doing a tough job, for crap pay and are under resourced and are now looking at strike action.

However, we need them because:

DeFi innovation gives bad actors a license to steal and it has happened, over and over again. Positive regulation doesn’t stamp this out, but it sure does put the breaks on. A firm operating without a license risks criminal prosection, that tends to sober the minds of those seeking to exploit investors. The problem for regulators of DeFi is that it is decentralised and can be set up in a DAO (Decentralised autonmous organisation) making it totally away from any organisation or jurisdiction you can take to court, that is an issue of geopolitical stability if that system is allowed to flourish.

The way to regulate DeFi is to regulate the on and off ramps, the banks, brokerages, trading house etc. If you cut off the ability for people to invest their money into DeFi projects, DeFi will not attain scale and therefore will be useful to a number of people, but not to everyone.. Which would be a shame, becuase that is the idea.

Governments don’t have the ability to prevent blockchains from existing, but they definitely have the ability to really marginalize it. Like if they ban all exchanges or all links from the fiat ecosystem to crypto.” — Vitalik Buterin — Ethereum Founder

ASMX.io, a company which I co-founded, has a private layer 2 blockchain system, connected to a fully recognised stock exchange and trades everything on-exchange. A regulated access to Security Tokens and crypto synthetics (where crypto can be represented on-exchange). Although I say so myself (there are some amazing brains working with me on this) it is an elgant solution to DeFi and CeFi working in tandem.

Of course if you are a blockchain maxi, or a DeFi maxi you will screaming that it is not pure, there is too much cetralisation etc. Please see above, you cannot hope to operate without regulation of some sort so partnering with firms like mine will be a win-win for both sides. With President Biden set to release an executive order on Crypto in February, could this be the start of regulating the space?

4. Security Tokens are coming

Photo by Markus Spiske on Unsplash

Right now, you may think that Cypto is it. The Daddy, the Don, the winner.

For the reasons I mention above, I am not so sure that it is a binary scenario. What we do know is the world will be tokenised (if you don’t think so, please see my previous frog based mental capacity statement).

However, if you have a commercial building portfolio would you choose to create an unregulated crypto token or a security token to tokenise your product. Would you want it traded anonymously or would you want it traded in an enironment that is regulated?

I believe that the regulators will be wading into the debate and you, as an asset owner do not need the uncertainty of whether your project is legal or not to cloud the goals that you have for tokenising your assets.

Bottom line is this; I love the innovation in the DeFi space, it is amazing and long may it continue, my personal bet is that security tokens and the regulated environment is an important step for the crypto and DeFi movement.

I would love to operate in an industry where there were no regulations for my products and services, but I have been around long enough to know that it won’t last. We all need to realised that CeFi and Defi are not at war, we are the new structures for the finance industry. If we squabble and argue as to what is true to the vision of Satoshi, we will miss the valuable lesson that Bitcoin gave us; a visione and pathway to a new financial system, one with transparency access for all and lower costs.

That should be the goal and I for one am all in.



David Bradley-Ward
Editor for

David used his experience in the alternative lending space to create the ASMX Group who own security token trading platform ASMX Pro