Digital assets are having a great impact on the financial market. The assets emerged after the financial crisis and are becoming popular as financial institutions move to customer-centric self-service platforms. The assets have disrupted operations in the traditional financial markets, putting pressure on banks and other financial institutions to reinvent themselves.
Therefore, banks must restructure their operations, improve efficiency and reduce fees to remain relevant. In the past few years, Fintech companies have shown interest in the assets forcing the banks to follow suit.
But the recent happening in the world economies is a cause of concern. The rising inflation and depreciation of the world’s major currencies and the plunge of stocks have caused jitters in the financial sector. In the stock markets, traders have been forced to look for the best crypto signals to keep afloat. The crypto assets, too, have not been spared. They have experienced fluctuations and lost value, making the stakeholders doubt whether the assets will solve problems in the financial sector.
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Despite all that, banks are still showing interest and exuding confidence in digital assets and Defi.
This is why they are partnering with authorities to explore digital assets. For Instance, JPMorgan has shown that DeFi, are vital tools that could help in enhancing cross-border transactions. This comes hot on the heels of one of America’s oldest bank’s announcement that they would launch a digital asset custody platform. The platform will allow a few clients and institutions to transfer or hold Bitcoin.
In the meantime, the US clearinghouse, payment companies, and the US banking association have said that banks are free to engage in digital assets.
According to BNY Mellon’s 2022 survey, there is an increase in demand, especially for financial institutions seeking access to crypto. About 91% are interested in tokenized assets. These investors use more than one custodian, while 35% conduct business with traditional banks.
Thus, the rising demand for digital assets services could be the main reason banks are interested in DeFi offerings and crypto.
According to Bitsamp USA CEO Bobby Zagotta,
Bitstamp has been receiving many requests for its service offering. The offerings will allow traditional financial institutions and fintech to enable clients to access cryptocurrency.
Furthermore, Bobby Zagotta said that last year, fintech asked Bitstamp to support cryptocurrencies. Consequently, they have discussed the downsides of not allowing clients access to digital assets. Already, banks are going through unprecedented demand from customers interested in buying and selling crypto. Thus, such needs must get addressed, or the clients will go elsewhere for the services.
Zagotta notes that banks that will not implement digital asset offerings may lose business to their competitors. He further noted that some banks have realized that it would be difficult to retain their customers looking elsewhere for crypto services if they do not offer the services.
Zagotta further noted that the BNY Mellon survey established that 65 percent of institutions are already engaging digital native platforms compared to 35% working with traditional financial players. Also, BNY Mello’s findings revealed that 63% of those who participated in the survey said they would rather take a longer settlement time in transacting with highly regarded traditional institutions.
Already, the Monetary Authority Singapore, banking entities and JP Morgan has been testing the proof-of-stake blockchain. The test results show that cross-border transactions are fast, secure, and cost-efficient. Thus, the efficiency of the blockchain solutions will give Defi an added advantage over the existing financial system, hence the reason why banks see great potential in digital assets.
Undoubtedly, large banks will be at a vantage point if they implement crypto and Defi Solutions. The Monetary Authority of Singapore and JP Morgan Survey have demonstrated this. They are steps in the right direction and likely lead to the adoption and implementation of decentralized solutions. Moreover, the survey has revealed that entities are spending resources and time researching DeFi frameworks that could benefit players.