Bitcoin (BTC) could be the leader of the crypto world. However, when DeFi Blockchain technology is mentioned, the leading altcoin Ethereum comes to mind. Russian banking giant Sberbank is switching to Defi, following the slow-moving trend of traditional banks.
Sberbank is in the crypto world with Ethereum, not BTC!
Russia’s largest state bank, Sberbank, is now entering the cryptocurrency industry. However, it is not making its stride with the market-leading Bitcoin (BTC), but with Ethereum, the hub of DeFi. Sberbank is one of a handful of traditional banks worldwide trying to profit from the DeFi market, which some estimate is a $13 billion market. Sberbank is building its own Ethereum tools on the Ethereum Blockchain. “This will give our customers access to new types of financial products and services,” says a Sberbank spokesperson.
Sberbank began its DeFi discovery in July 2022, about six months after Russia’s war with Ukraine. The bank has created a special platform for registered securities firms (and accredited investors) to issue their own tokens or invest in them and BTC and other cryptocurrencies. A spokesperson for Sberbank said that in the “near future” (currently sanctioned) the Russian bank will allow its individual customers to use and trade Ethereum-based digital assets. The role of the bank will mainly be to provide information and advice.
Russia to Brazil
In another BRIC market, Brazil’s leading bank Itau has partnered with Brazil’s Central Bank ‘Lift Lab’ to trial DeFi. Guto Antunes, head of Itau Digital Assets in Sao Paulo, said, “This is hybrid finance where the traditional banking market is combined with a digital one (i.e. via Blockchain technology). We see the bank as preparing for the next generation of customers who have acquired different habits and are aware of the tokenization of financial services,” he says.
Like Sberbank in Russia, Itau uses Ethereum. There are other DeFi Blockchains that compete with Ethereum, such as Solana (SOL). Some focus on trading volume; others provide lower ‘gas charges’. Other competitors offer a more user-friendly experience for developers to create smart contracts and create new ways of interaction between public and private Blockchains. Meanwhile, Itau announced the bank’s first tests of a cryptocurrency custody service in November 2022. The consensus view is that TradFi won’t kill DeFi. For now, the relationship between BRIC banks and the global Ethereum community can be described as a friendly one.
What does TradFi look like when combined with DeFi?
“There will be a lot of holding hands,” Epstein said in an interview. In effect, TradFi will serve as front-end gateways to DeFi, giving customers who want custody and advisory services the option to have it. “The first example of this relationship is pretty primitive, but you can look at Fidelity offering custody of Bitcoin (BTC) as the first steps in the TradFi/DeFi relationship.”
With the ‘hybrid finance’ model mentioned by Sberbank and Itau, a traditional retail bank could offer crypto staking services as a feature for regular bank accounts. Banks will manage all the different accounts as a service for their customers. A new financial subsector is being built around this TradFi/DeFi merger. Banks with wealth management operations, such as Sberbank or Spanish DeFi-friendly bank Santander, can expand their product lines. Some investments may even be insured, as savings are insured by the FDIC for up to $250,000.
The motivation for banks to explore DeFi tools for TradFi customers is the hope of offering more product options at lower costs. “As people can go directly to DeFi exchanges and do it themselves, banks and other financial institutions will have to compete on customer service,” Epstein said. For those who choose to go through Bank of America or Schwab, the backend will be as invisible as it is today,” he says.
The global DeFi boom
More than 40% of banks worldwide are experimenting with some form of Blockchain technology today. Roman Troskin, Director of Strategic Marketing at BDC Consulting in Estonia, says this is due to lower cost, transaction speed and DeFi. “You may not even suspect that your daily purchases, transfers, and other transactions at your bank are processed and stored on the Blockchain,” Troskin said. Twenty years ago, no one would have dreamed of buying stocks from your phone. But now it is a fact and even a little outdated. Forget cryptocurrencies. The most important thing here is Blockchain and the technological advancement it brings to traditional finance,” he says.
On the other hand, specifically regarding cryptocurrencies, a report by San Francisco-based market research firm Grand View Research predicts that the global DeFi market will expand at a compound annual growth rate of 46% from 2023 to 2030. dual world of bank blockchains or decentralized cryptocurrencies, but both coexist. Antunes of Itau bank said, “Our mission is to provide a new level of trust in the (DeFi) market. “As soon as the regulation in Brazil allows, we will be ready to offer the best services in digital assets.”
TradFi and DeFi can live happily ever after. However, regulators will either let this union work or ruin the love affair. For now, some banks are hoping that capitalizing on crypto trends will combine the best of both worlds.
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