The Push to Build a DeFi Safe Space for Institutions and Regulated Investors
Decentralized finance (DeFi) is growing. People are tired of the regulations tied up with traditional banks. They’re tired of watching their money be lost to fees and expensive overhead costs.
Regulated investors want a better space. Institutions, too, want a better space.
DeFi offers the solutions to some of the most modern problems that pertain to banking and investing in traditional manners.
Creating a DeFi space makes it possible to tap into the explosive growth within the industry. The growing interest in digital assets is proof that institutional investors are ready to take the plunge.
The DeFi space has already seen tremendous growth — from $700 million to nearly $80 billion in a single year. And within the next few years, it could be substantially more as people move trillions from traditional and centralized institutions to DeFi.
Why is the Interest Growing?
Many people are interested in digital assets, such as cryptocurrencies, blockchain tokens, and more. So much of our world has already gone digital. It’s not a passing fad. Now that this has become universally accepted, digital assets are becoming more accepted — and more lucrative.
A report published by Fidelity Asset Management in early 2021 identified that 80% of institutions surveyed have expressed an interest in investing in digital assets. 36% have already made the plunge in one way or another, with Bitcoin being the asset of choice.
Evertas, a cryptocurrency insurance firm, has already seen that 90% of those surveyed in the US and UK already plan on increasing their cryptocurrency investments.
Why are institutional investors looking to move to digital assets? The benefits are simple:
- Lower transportation costs
- Lower transaction costs
- Lower storage costs
When the costs of acquiring and maintaining digital assets are significantly lower than real estate or hedge funds, it makes sense.
In the past, digital assets have been out of reach for many because of not having sufficient regulation, untrusted custodians, or a lack of insurance.
Hastily developed and released protocols in the DeFi space led to a few hundred million being lost to hackers and economic exploits, but even with these staggering numbers the thefts still amount to only a fraction of a percent of the money under management in DeFi. This only highlights the need for regulation and trusted custodians. Otherwise, digital assets are stored based on hopes and dreams.
Institutional investors want to see trusted companies stepping up to offer custody. They want to have confidence, peace of mind, and a familiar operating model. The New York Department of Financial Services for example stepped in to charter a trust company to secure their digital assets. This solution provides the needed “safe space” so that pension funds, foundations, endowments, and other institutional players have the peace of mind they so desperately need.
Bitcoin and other digital assets are gaining popularity, but they haven’t gone mainstream among investors yet. Why? Predominantly due to a lack of insurance, regulation, and security.
By creating a DeFi safe space that offers insurance, regulation, and security, it can ensure that institutional investors can deploy real money. It allows digital assets to gain more momentum.
More platforms are popping up to help institutional investors gain confidence in the digital asset market. When the same benefits are offered in the traditional world of securities, it provides greater peace of mind and ensures that institutional investors feel comfortable moving into digital assets with the same amount of money that they would dedicate to hedge funds and other traditional alternative asset classes.
The Yieldster Project is unique because it provides institutional investors with protocols to participate in DeFi with greater confidence. They can stay within their regulatory frameworks while taking advantage of the tremendous and stable returns through automation and streamlining. Additionally, the Yieldster platform offers access to tokenized real-world income streams eliminating the reliance on the often volatile crypto space.
Legislation and Regulation is Changing and Adapting to Digital Assets
For years, the SEC was content to ignore what was going on with digital assets. They assumed that it was a temporary disruption and that it would pass. However, it’s clear that such things as cryptocurrencies and tokens are here to stay. And with that realization regulators will have no choice but to step in and create ever more stringent regulations to minimize the risks for investors
With the shift in legislation comes new regulations as well as new opportunities for insurance. And some innovative products are already on the horizon.
The seriesOne Liva Fund, for example, which is built on top of the Yieldster platform is a fully licensed and regulated DeFi investment fund that can take advantage of the many opportunities the DeFi space offers for institutional investors and wealth managers. It’s the first time that a regulated fund that uses automated DeFi investment strategies was allowed to enter the regulated investment markets.
Even the SEC is becoming more tolerant of public blockchain investment vehicles. And with the SEC on board, it offers more confidence to institutional investors who have hung back from taking the plunge into digital assets.
As the interest grows, it’s not just about the digital assets themselves. It’s also about DeFi protocols and new assets and asset classes moving into the DeFi space. Unlike investing in volatile crypto assets like Bitcoin or Ethereum, the DeFi space enables investors and money managers to design products that for all practical purposes eliminate most of the volatility inherent in the crypto space.
Is there more risk? Not necessarily. While there is risk in investing in DeFi these risks are on a different level compared to traditional alternative asset classes and many of these risks can be mitigated away. And that’s why the Yieldster Project has been developed.
The Future of DeFi and Traditional Investments
More companies are seeing the need to embrace DeFi just as much as they embrace traditional investments. It’s leading to the desire to make the DeFi space safer through protocols, insurance, and smart contract safeguards.
When risks can be mitigated, it can demand more interest from traditional investors.
Traditional investments are moving into DeFi. It adds diversity to the ecosystem and allows people to gain success from the cryptocurrency market. As more people adopt crypto, it leads to higher liquidity and reduced volatility.
There are challenges, yet all things require time. With greater interest comes the demand for a DeFi safe space that can provide the solutions.
