The Capital
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The Capital

Banking competition is heating up in the metaverse — What is the difference between Open Banking and Open Finance? DeFi super app?

Perspective for today:

  1. Banking competition is heating up in the metaverse
  2. What is the difference between Open Banking and Open Finance?
  3. Binance is out of Ontario, Canada
  4. DeFi super app?
  5. One in Three Women Plan to Buy Crypto: BlockFi
  6. Institutional DeFi Milestones: A 2021 Review
  7. Open finance use case: Credit Cards
  8. Goldman Sachs’ made an over-the-counter (OTC) cryptocurrency transaction

NFTs are coming to Instagram

Mark Zuckerberg confirmed that the company is building the technical functionality so that users can display their NFTs on Instagram — and even “mint” some NFTs within the app.

“We’re working on bringing NFTs to Instagram in the near term,” he said during an interview at the South by Southwest conference Tuesday, but declined to share specifics on when and how the feature might work.

Zuckerberg spent most of the nearly 50-minute long conversation talking about the so-called metaverse, his vision for a more immersive version of the internet.

Former Meta executive David Marcus said last August that the company was looking into building NFT features alongside the company’s Novi digital wallet.

At the SXSW conference, held in Austin, Texas, Zuckerberg also discussed the war in Ukraine, calling it a “massively destabilizing world event” — his first public comments since the conflict began last month.


Banking competition is heating up in the metaverse

On Wednesday, Hong Kong–based bank HSBC said it would join the metaverse through a partnership with the Sandbox platform. The bank will be buying a plot of digital land in the virtual world and centre it on sports, e-sports, and gaming, according to a Wednesday blog post by the Sandbox, although the two parties did not give further details.

“At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and for the communities we serve,” wrote Suresh Balaji, HSBC’s chief marketing officer for the Asia-Pacific region.

After HSBC announced it would be joining the Sandbox, the platform’s native cryptocurrency, SAND, jumped more than 11% on Wednesday to $3.01. The token was priced at about $2.96 as of Wednesday afternoon, still up 9%.

The bank’s move to buy digital real estate comes on the heels of JPMorgan Chase & Co. venture into the metaverse last month. The American banking giant created a lounge in another metaverse world, Decentraland, featuring a spiral staircase, a “live” tiger, and an illuminated picture of CEO Jamie Dimon.

JPMorgan wrote in a report last month that the metaverse represents a $1 trillion market opportunity in the coming years. Projections from Goldman Sachs and Morgan Stanley have been even rosier. Goldman said in January that the metaverse could be more like an $8 trillion opportunity. Morgan Stanley followed up in February by saying the metaverse would be worth $8 trillion in China alone.

So far, HSBC and JPMorgan are the only banks that have announced digital real estate outposts in the metaverse. Each has chosen two different platforms, with different strengths.

And aside from banks, all kinds of brands have bought themselves an outpost on one metaverse platform or another.


What is the difference between Open Banking and Open Finance?

Very interesting explanation by Nordigen.

1️⃣ The primary distinction between open banking and open finance is that one has a legal and regulatory framework while the other does not. Open finance will expand on the concept of open banking by allowing customers’ data to be accessed and shared across a wider range of financial products and services.

2️⃣ Open finance will give regulated products and services access to a consumer’s whole financial footprint, similar to how open banking allows regulated products and services to access transaction data from banks.

Personal opinion.

What is the enabler of Open Finance?

Embedded finance is one of the main enablers of Open Finance. Through seamless integrations between multiple financial and non-financial services companies will be able to personalise the customer experience at a granular level.

I would divide embedded finance into two versions.

Embedded Finance 1.0 was mainly about enabling banking services through BaaS products.

Embedded Finance 2.0 will be going beyond finance and banking. We should expect wealth, insurance, pensions, tax, etc., integrations. One of the main advantages of Embedded Finance will be its ability to enable companies to create their own super apps.

Binance is out of Ontario, Canada

Binance has confirmed to the Ontario Securities Commission (OSC) that it will no longer open accounts for new customers in the Canadian province of Ontario.

The industry’s largest exchange also committed to cease trading for existing Ontario-based accounts and will provide fee waivers and reimbursements to certain users.

These commitments — sent to the OSC here — are accompanied by several acknowledgements made by Binance about the reality of the exchange’s activity in Ontario.

The exchange has acknowledged that Ontario investors were able to continue to trade on its platform after restrictions were “supposedly put in place.”

Importantly, Binance’s undertaking to the OSC represents a “legally enforceable” commitment from the exchange to the regulator going forward.

“This undertaking represents a legally enforceable commitment by Binance to the OSC. The OSC reserves the right to take enforcement action against Binance for any past, present or future breaches of Ontario securities law not arising from the events described in the undertaking,” the OSC said in a statement yesterday.

The move comes after a series of spats with the Canadian regulator, a story that began in the summer of 2021.


DeFi super app?

Polkadot-based lending protocol @Parallel Finance is trying to become a one-stop-shop for all corners of decentralized finance (DeFi).

That effort accelerated Friday with the initial launch of six products spanning the DeFi spectrum: from wallets to staking, from crowd loans to cross-chain bridges, an automated market maker, and yield farming to boot.

“Overall, we’re building a ’super app,’ an end-to-end DeFi platform for Polkadot to start,” founder Yubo Ruan told CoinDesk in an interview. He said an Ethereum offering is also in the cards.

The “super app” strategy is an uncommon one in crypto, he said. Most DeFi teams opt to specialize in one flagship product, be it a bridge or a wallet. Ruan said Parallel’s uncommonly large team (60–70 people) means it can cover more ground.

Parallel is one of the larger DeFi projects in the Polkadot world, with over $500 million in total value locked (TVL) and a 21% market share, according to its website statistics. It’s also one of the better-funded projects and is backed by Sequoia Capital and Founders Fund, among others.

Building and hosting multiple DeFi products is a competitive advantage, according to Ruan. For one, they’re complementary to each other: The farming function generates yield just as Parallel’s crowdloans product might. The assets generated on one can easily transfer over to others.

Ruan also said the DeFi super app makes the road to mass adoption a little smoother. It’s easier for newcomers to play around with market making and staking when their wallet lives right down the street.


One in Three Women Plan to Buy Crypto: BlockFi

BlockFi Co-founder and Senior Vice President of Operations Flori Marquez joins Emily Chang and Sonali Basak to discuss the results of their latest Women x Crypto 2.0 survey, showing that 1 in 4 women report owning crypto and 1 in 5 see crypto as a means to achieve financial goals. The study also finds women still face challenges trying to break into the crypto industry.

Institutional DeFi Milestones: A 2021 Review

DeFi and Web3 were at the forefront of institutional interest in 2021.
Institutional investors, who may have been skeptical about the investment opportunities of DeFi earlier, came to recognize the growth of Web3 and its related financial instruments powered by DeFi to be inevitable.

As a result, institutions dominated DeFi transactions in the second quarter of 2021, according to data from Chainalysis, a blockchain data platform. Large institutional transactions, which are transactions above $10M, accounted for over 60% of all DeFi transactions over this period.

Part of the attraction of DeFi for organizations is the high yields offered across the sector when compared against returns from TradFi instruments. These higher yields become even more lucrative as increasing inflation cuts into gains from TradFi instruments.

Investment Firms

Many investment banks, including BlackRock, BNYMellon, and Goldman Sachs, either revived their crypto desks or entered the space.

European Investment Bank (EIB), the investment arm of the European Union, issued its first-ever digital bond, worth 100M euros, on a public blockchain. Societe Generale, France’s third-largest bank, also proposed to borrow $20M in Dai from MakerDAO, one of the largest DeFI protocols.

Retail Banks

JPMorgan Chase & Co. said in January that it may offer some clients the opportunity to invest in bitcoin funds. Similarly, Citi launched a digital assets unit offering crypto investment services amid increasing interest from its clients.

Bank of America also launched a research unit to look into digital assets, while U.S. Bank launched cryptocurrency custody services.

In 2021, many leading institutions shifted away from skepticism and took meaningful steps into the DeFi and Web3 ecosystem with business model pivots and capital deployment.

A whopping 90% of crypto’s largest deals happened in 2021, according to a Messari report. And this 90% did not even include Coinbase’s direct listing, which valued the crypto exchange at nearly $86B.

These strides are strong indicators of the upwards journey of institutional interest in 2022.


Open finance use case: Credit Cards

The global COVID-19 pandemic changed the credit card market. According to Experian, total revolving credit card debt in the United States fell from a high of nearly $1.1 trillion in 2019 to $950 billion in early 2021, and the balance on credit cards dropped from an average of $6,629 at the end of 2019 to $5,897 at the end of 2020. See the graph from below for details.

These trends have made some financial institutions nervous, as they indicate decreased card income.

What’s driving the trend? Among many things, there’s the matter of consumers receiving stimulus funds and using those funds to pay down their credit card debt. Then there’s also the rise of a buy now, pay later (BNPL) approach to shopping, which has exploded in popularity and is expected to skyrocket by 47% over the next year.

To explore this second point in-depth, consider that the European fintech company Klarna raised $639M at a $45.6B valuation to enter the U.S. market and further promote their BNPL approach to banking. Klarna enables consumers to split payments over the course of several weeks, changing the way they view credit. After all, when consumers pay over six weeks with no interest, they’re no longer using their credit card as much as they once did.

Given the rapid growth of this BNPL approach, it’s time for banks to take note and invent new approaches of their own.

Open finance can help with this.

One option is to use open finance to offer an alternative to buy now, pay later — one that helps consumers consolidate their current credit card debt into a series of set payments. With the insights available from tokenized, credential-free account connections, banks can get the insights they need to create fixed tranches and allow consumers to choose the amount, rate, and payment schedule they want, offering clarity about the total payout. Financial institutions that offer this level of service, enable their customers to take a customized approach to pay off debt.


Goldman Sachs’ made an over-the-counter (OTC) cryptocurrency transaction

Goldman Sachs just became the first major U.S. bank to have made an over-the-counter (OTC) cryptocurrency transaction, according to an announcement made public today. The Wall Street giant bought an OTC Bitcoin non-deliverable option (NDO) from Galaxy Digital.

An OTC Bitcoin NDO sounds complicated, but it basically means Goldman Sachs bought a contract betting on the future price of Bitcoin — rather than actually buying the digital asset itself.

Galaxy Digital is a New York-based cryptocurrency investment firm, run by billionaire Mike Novogratz. It has a partnership with Goldman Sachs as a liquidity provider for the investment bank’s Bitcoin futures trading desk, which launched last year.

Max Minton, Asia Pacific head of digital assets for Goldman Sachs, said in a statement: “We are pleased to have executed our first cash-settled cryptocurrency options trade with Galaxy. This is an important development in our digital assets capabilities and for the broader evolution of the asset class.”

Damien Vanderwilt, co-president and head of global markets at Galaxy Digital, added: “We are pleased to continue to strengthen our relationship with Goldman and expect the transaction to open the door for other banks considering OTC as a conduit for trading digital assets.”

Goldman Sachs’ interest in the crypto world has changed over the years. In 2018, it announced plans for a crypto trading desk but then shelved the idea. Last year, it opened the desk.




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