March 29, 2023
Cetif Advisory - the consultancy spinoff of Cetif, Research Centre of the Università Cattolica del Sacro Cuore of Milan - continues its research and experimentation of security tokens, extending the scope of analysis of this innovative type of financial instrument and the fast-growing Decentralized Finance (DeFi) industry, and specifically Institutional DeFi.
Cetif Advisory led the collaboration between digital asset direct custody platform Fireblocks, technical developer Reply, and legal and tax consultant Linklaters to launch the Institutional DeFi for Security Token ecosystem, with the aim of enhancing the Security Token instrument for the secondary market.
DeFi is an innovative financial trend based on decentralized protocols (enabled by permissionless blockchain technology and smart contracts) that aim to replicate existing financial services in an inclusive and transparent manner. Nonetheless, currently, DeFi services are mainly adopted by retail investors who operate in a natively deregulated environment without protections and are exposed to significant risks. To allow institutional players to engage with this typically unregulated and permissionless environment, platforms are being developed that allow institutions to interact within DeFi in accordance with stringent regulatory compliance requirements.
The Institutional DeFi ecosystem project aims to allow institutional players to operate in this environment in compliance with regulatory guidelines and requirements, while offering their clients financial services typical of the DeFi ecosystem, drastically mitigating security and operational risks and maintaining significant returns, while safeguarding all actors involved.
A survey on the topic of DeFi conducted by Cetif Advisory with leading financial institutions - between June and October 2022 - shows that the utility of DeFi has been actively analysed by respondents for at least a year (81%), is definitely not considered a transitory or overrated phenomenon (81%), and all respondents unanimously agreed that the main obstacle withadopting DeFi is the lack of a regulatory framework.
Confirming their focus on DeFi, almost all financial institutions surveyed believe that not exploring DeFi means potentially losing a strategic advantage (92%). At the same time, 100% agree that DeFi will enable industry innovation and create new financial services, and 92% see DeFi as a tool to create new business models.
The more than 20 institutions surveyed also shared that the most interesting use cases for early experimentation with Institutional DeFi are custody services and decentralized exchanges using Automated Market Makers (AMMs) and Liquidity Pools.
Following the valuable findings from the research, Cetif Advisory, together with Fireblocks, Reply, and Linklaters, launched the ecosystem project Institutional DeFi for Security Token, a unique initiative in Italy and Europe, involving leading Italian banks, asset management companies (or Società di Gestione del Risparmio, otherwise known as SGRs) and primary financial players, such as AcomeA SGR - Gimme 5, Euromobiliare AM SGR, Banca Mediolanum, Banca Sella, Banca Popolare di Sondrio, Credem, Hype, Intesa Sanpaolo and Mediobanca. The project remains open to other interested financial institutions in the next two months.
“We believe it is vitally important to create the conditions for DeFi to become a safe and open operating environment for supervised entities as well,” explained Imanuel Baharier, General Manager of Cetif Advisory. “We are confident that enormous benefits for the entire financial system could result from such accessibility in terms of security for institutional and professionals operators, and in terms of opportunities, stability and resilience for the whole system.”
Initial co-design meetings are currently in progress with participants of the platform, which will be tested in an ecosystemic and pre-competitive way from September 2023.
Cetif – Università Cattolica del Sacro Cuore’s Center on Technology, Innovation and Financial Services -has been conducting studies and promoting research on the dynamics of strategic and organizational change within the financial, banking and insurance sectors since 1990, aggregating over 30,000 professionals in its network. Cetif Advisory is Cetif's consulting spin-off. Launched in January 2020, it quickly gained a leading market position, thanks to a unique capability: creating and fostering external and internal ecosystems in and between companies that lead the market sectors in which it operates. External ecosystems become possible, thanks to a peculiar format developed by Cetif Advisory to successfully setup and run ecosystemic projects characterized by a pre-competitive nature while leveraging Blockchain technology as a frontier innovation enabler for the entire Italian financial and insurance system. Internal ecosystems are implemented thanks to distinctive organizational project formats aimed at fostering collaboration and interaction between the different areas and business units of the financial institutions being supported by Cetif Advisory (banks, insurance companies and SGRs) in their evolution towards the use of Artificial Intelligence, and the diffusion of a deep data culture. In its relentless work for the creation of ecosystems, Cetif Advisory productively and proactively interacts with national authorities and regulators to ensure a constant alignment with regulatory frameworks present and future. Cetif.it
Reply [EXM, STAR: REY, ISIN: IT0005282865] specialises in the design and implementation of solutions based on new communication channels and digital media. Reply is a network of highly specialised companies supporting key European industrial groups operating in the telecom and media, industry and services, banking, insurance and public administration sectors in the definition and development of business models enabled for the new paradigms of AI, cloud computing, digital media and the Internet of Things. Reply services include: Consulting, System Integration and Digital Services. www.reply.com
Linklaters is a leading international law firm, that supports and invests in the future of its clients wherever they operate. By combining legal expertise with a collaborative and innovative approach we help our clients navigate constantly changing markets and regulatory environments, pursuing opportunities and managing risks around the world. In Italy, Linklaters has been present for more than 15 years and counts more than 100 professionals, including fifteen partners and six counsel. Structured in three divisions, Corporate, Dispute Resolution and Finance, and specialising in industry sectors and areas of activity, Linklaters’ professionals assist major financial institutions, funds and corporates on complex and cutting-edge transactions. With its Fintech and Digital Transformation Group, Linklaters positions itself as a 'legal enabler' of innovative business models by supporting its clients not only on the legal side but also in the validation and joint development of products and processes, demonstrating the Firm's active role in the innovation and technology ecosystem. Linklaters.com
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves thousands of financial institutions, has secured the transfer of over $4 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. Some of the biggest trading desks have switched to Fireblocks because it's the only solution that CISOs and Ops Teams both love. For more information, please visit www.fireblocks.com