• In the midst of DeFi hype, Bitcoin-centric Defi products are lining up to take their place in the decentralized finance boom
  • The United States Acting Comptroller of the Currency believes fintech has a major role to play in upgrading legacy banking

Bitcoin and Ethereum markets remain a few percentage points lower than they were from the all-time highs but trading volume has not abated much and sentiment is still very high even after the recent sell offs that see Bitcoin pushing back towards USD 12,000 and Ethereum maintaining a level above USD 400.

There seems to be no way but up for the markets and August has so far seen a doubling of Bitcoin value being locked up in decentralized finance (DeFi) platforms with buyers still outnumbering sellers the entire week. Traders are now apparently licking their chops, considering better returns in the DeFi market and causing them to slowly shift capital away from derivatives markets like Bitcoin options.

One derivatives provider, Alpha5, definitely sees the trend as founder Viashl Shah notes:

“Every derivatives trader that was looking for incremental yield and levered returns has been besotted by the magnitude of moves in DeFi. So, naturally, cost of capital dictates at least some attention that way.”

This is a strong statement of intent from the market, where only BTC 1,453 had been locked at the turn of the new year, now growing over 30 times to just under BTC 48,922 this week. At the heart of Defi platforms is their ability to give significant “yield” or new avenues to generate income, with the promise of programmable money via smart contracts allowing users to still keep their Bitcoin, while generating income, usually from lending activities and earning interest.

Co-founder of trading firm Global Digital Assets Michael Gord does note that people are booking in profits quite quickly, nothing that DeFi products do tend to still seem in a constant shift of sentiment. He believes that most DeFi profits are being hoarded back as Bitcoin as a solid sanctioning of it as a safe asset. He said:

“DeFi long term will revolutionize finance, but this short-term bubble is bound to pop eventually, in my opinion.”

Meanwhile, the US government continues its seemingly unstoppable move toward adopting emerging technology like blockchain in an effort to modernize traditional banking systems. In a recent interview with CNN, United States Acting Comptroller of the Currency, Brian Brooks, said he was among those willing to embrace fintech to pave the way for modern banking.

Brooks himself used to be the Chief Legal Officer at Coinbase, and now said that his duty in his new role was to “identify impediments that make it harder for people to get what they want and need”.

Banks have already had the go ahead this year to provide custody services for crypto, and the Acting US Comptroller now believes that a digital dollar or central bank digital currency (CBDC) could now be issued by private companies, with the backing of bank deposits.

The need now, he says, is to provide faster payments, with the immediate urgency to issue COVID-10 benefit payments to Americans one recent example to look at, whereby previous funds had been sent through cheques in the mail even, something Brooks described as “19th century banking rails”.

The fact that Americans are now turning to alternative payment systems outside of the banking system like Square, PayPal and Stripe, proves that the demand is there and is growing. However, such a move may not be something the regulator would want as these activities would then be outside of their control.

The alternative? According to Brooks, the workaround would be something akin to a system already being tested out in places like the United Kingdom, which he described as “faster payments that are innovated by private companies, but then supervised by federal watchdogs”.

According to him, some 50 million Americans already own Bitcoin and some other form of digital assets and he hoped that he would be able to help ensure these funds were “accessible to them in the same safe and sound way that they can get their checking account”.

 

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