DeFi
Crypto ETFs and RWA tokenization serve as a bridge between DeFi and TradFi – Blueberry CEO
(Kitco News) – Ethereum (ETH) is making headlines again as the U.S. Securities and Exchange Commission (SEC) scrambles to provide guidance in scouting Ether exchange-traded fund (ETF) candidates after months of obstruction.
The about-face comes as crypto has become a trending topic in the upcoming US election, with Democrats trying to avoid alienating much of the voting base after Trump came out in force with a pro- crypto.
But it’s not just Ether ETFs that have boosted ETH’s outlook in 2024, as the network has undergone several upgrades, including the Dencun hard fork, which has helped reduce the cost of trading on Ethereum protocols of layer two (L2), an issue that was a major problem for the network and remains an issue for transactions that take place directly on the first layer of Ethereum.
To gain insight into the latest developments in the second-largest crypto by market capitalization, Kitco Crypto spoke with Jonathan Thomas, CEO and co-founder of Blueberry Protocol, a DeFi platform that offers a non-custodial prime brokerage experience.
According to Thomas, Blueberry strives to make integration into DeFi easier for individuals and institutions, as the world moves toward widespread integration of blockchain technology into various facets of society.
The conversation took place before the SEC’s about-face on Ether ETFs, and at the time, Thomas said that “the SEC has made it clear that it has no problem taking its time with crypto approvals . While I hope an Ether ETF approval is on the horizon, I don’t think anyone can say with absolute certainty what the outcome will be.
It turns out his hope came true, as Barron’s reported that on Monday, SEC staff told the exchanges where the products would be listed that it was inclined to approve them, according to to user database
“The agency has provided feedback on the applications which, if resolved in time, could result in approvals as soon as this week,” DB said.
Addressing the recently launched Bitcoin (BTC) and Ether ETFs in Hong Kong, the effect they will have on the market and whether they would offer Chinese investors a way to re-engage with cryptos, Thomas said: “Whenever investors can have more access to cryptos, this will have a positive impact. on the ecosystem, but it is important to remember that ETFs are still not available in mainland China.
That said, he noted that “the Hong Kong market will inject new liquidity and likely have a cumulative effect on growing global attention.”
Dencun upgrade
Thomas said he was “cautiously optimistic about the effects of the Dencun upgrade on the Ethereum ecosystem.”
“Decreased transaction fees have improved the accessibility and efficiency of Ethereum for users and developers, potentially driving increased adoption and innovation within the ecosystem,” he said. “I view the Dencun upgrade as a positive development that strengthens the overall health and growth potential of the Ethereum ecosystem, providing new opportunities for projects to thrive.”
Institutions and DeFi
As the conversation shifted to the evolving crypto landscape, the arrival of institutional investors, and how traditional finance (TradFi) and decentralized finance (DeFi) will merge in the coming years, Thomas noted that “Non-custodial prime brokerage services are vital in the current crypto environment, especially with the growing awareness of ETFs and increased interest from major funds such as pensions.
“These services provide institutional investors with access to crypto markets while ensuring asset control and addressing security, regulatory and risk management concerns,” he said. “As institutional involvement grows, these brokerage services become increasingly essential to facilitating secure and efficient trading, liquidity provision, and portfolio management within crypto.”
The launch of several spot Bitcoin ETFs in the United States has opened the door to institutions will start investing in Bitcoin en masse, with Q1 13F filings with the SEC showing that as of May 9, 563 professional investment firms reported holding $3.5 billion in Bitcoin ETFs.
As more and more companies jump into the crypto waters, it’s only a matter of time before they start making their presence felt in DeFi, which will truly start the ball rolling for change in the global financial system.
“Institution-led DeFi marks a fundamental shift in finance, bringing innovation, inclusiveness and democratization,” Thomas said. “This progression should benefit both institutional entities and individual users.”
“However, it is imperative to maintain a delicate balance between institutional commitment and safeguarding the fundamental principles of decentralization, transparency and user empowerment, which constitute the foundation of the DeFi movement,” he stressed.
For institutions to properly engage in DeFi, Thomas said: “Improving regulatory clarity and strengthening DeFi infrastructure are crucial steps to incentivize greater institutional participation in the field.
“Currently, the regulatory landscape for cryptocurrencies in the United States remains ambiguous, leaving many organizations skeptical and confused about the legality of their actions,” he said. “By establishing a clear regulatory framework, institutions can gain a sense of confidence in the crypto sector, fostering an environment in which innovation can thrive.”
Thomas also said work needs to be done on the development side to ensure the level of demand that is sure to come from institutions can be met.
“DeFi protocols need to improve scalability to meet institutional demand, which can be achieved by being optimization-minded, using layer-two solutions, cross-chain messaging services, and further network enhancements main will help reduce congestion on the Ethereum network,” he said. . “Additionally, improved composability between DeFi platforms and blockchain networks facilitates seamless asset transfers and cross-chain transactions, meeting the diverse portfolio management needs of institutional investors across various protocols and ecosystems.”
An emerging trend likely to accelerate the process of institutions getting involved in the world of DeFi is the tokenization of real-world assets (RWA), which has gained momentum in recent months as $1.34 billion in vouchers of the US Treasury have already been tokenized, according to data provided by RWA.xyz.
“RWA is certainly going through a huge moment in 2024,” Thomas said. “We’ve seen incredible use cases across all industry sectors. For institutions in particular, I am confident that RWA will help bridge the gap between TradFi and DeFi.
“Additionally, RWA tokenization allows institutions to expand their investment portfolios and improve risk management by tapping into a wider range of asset classes and global markets,” he added. “Institutions have the ability to tokenize various real-world assets, spanning commercial properties, corporate bonds, infrastructure projects and trade finance tools, thereby maximizing risk-adjusted returns and enhancing the sustainability of the wallet.”
Stablecoins and a digital dollar
Another factor needed to accelerate cryptocurrency adoption in the United States is the passage of stablecoin legislation, which will likely be one of the first steps taken by the government as it moves towards the release of a digital dollar.
“Enacting stablecoin legislation in the United States represents a significant step toward implementing a digital dollar, but it is only one aspect of a broader rollout,” Thomas said . “Clear regulations for stablecoins are essential to ensure consumer protection, financial stability and regulatory compliance, potentially driving the development and adoption of digital dollar initiatives.”
While stablecoin legislation is an important first step, Thomas suggested that “the success of a digital dollar also depends on factors such as technological infrastructure, alternative structures and public acceptance.”
Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade any commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no liability for loss and/or damage arising from the use of this publication.