May 2, 2022

Exponential Growth: a CeDeFi Opportunity

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Coinchange recently published a research paper, co-authored by Fireblocks and having been reviewed by Alkemi. The paper discusses three lending protocols used to invest in the DeFi space while addressing security concerns that the non-DeFi-native may be concerned with. The entire ecosystem has given rise to rDeFi (regulated DeFi) a new segment of the DeFi sector, which allow reluctant institutions, an easy way to get into the crypto landscape while ensuring that it complies with their regulatory framework via purpose-built or regulatory compliant protocol approach. 

For a more in-depth view of the topics covered, download our research paper here.*

The Main Protocols Covered

3 KYC/AML (know your client & anti-money laundering) compliant protocols were reviewed: AAVE Arc, Maple Finance, and Alkemi Network. The report goes further to analyze how established DeFi protocols like Maker DAO are readying themselves to become regulatory friendly and how Compound Finance has launched their version of rDeFi.

The research paper explains why DeFi is not only beneficial for the everyday consumer, but how Defi-based lending/borrowing among institutions can bypass the traditionally, very costly operating expenses traditional financial institutions incur. According to recent findings from the Bank of England, those expenses can cost them $20 billion dollars annually in trade processing, which the use of blockchain can reduce by up to 80%, further reducing consumer costs

Not only did the digital age bring with it market “disruption” but with blockchain capabilities, we have now begun disrupting the costly nature of our financial institutions. The report goes on to outline how more than simply refining financial business processes, DeFi is well-positioned to bring innovative new financing options due to the ecosystem not relying on or using “any of the TradFi structures to build its alternative financing structures” and eliminate many 3rd parties involved with TradFi (Traditional Finance), increasing efficiency and reducing costs.

The Extra Steps in Securing DeFi

One of the biggest concerns when it comes to the DeFi market is security. According to Fireblocks, a crypto and digital assets platform designed for businesses, security issues common in DeFi opens the floodgates for banks to be exploited by bad actors seeking to capitalize on a “perceived” lack of security. Coinchange has addressed these issues by placing KYC, KYT, and AML security compliances in place to help establish a secure framework for all our customers. 

Coinchange Financial, being a consumer Fintech company specialized in providing yield to our customers through proprietary DeFi strategies, has always had security being one of its most pressing concerns, and as such has already implemented KYC, KYB, KYT, and AML processes implemented from when our platform went live in June 2021. Moreover, Coinchange has also received the FinTrac and FinCen licenses and our next goal is to acquire our Money Transmitter License across 33 U.S. states. Finally, we are in the process of being fully regulated under EU law with the Markets in Crypto-Assets Regulation. As already mentioned, Fireblocks is one of the main entities ensuring Coinchange’s security, but we also have Coincover custodian services, and with all of these security layers, we allow investors to benefit from fully automated DeFi strategies, utilizing numerous different protocols producing daily compounding yield while protecting the principal invested. 

What This Means for The New Financial Market

As the DeFi space begins to integrate regulatory frameworks into its protocols, enabling pools of liquidity to open up to even more users, the room for greater efficiency and diversification is going to increase exponentially for institutions. For those businesses that consider financial liquidity a best practice and want to maintain regulatory compliance, AAVE Arc would be the ideal protocol to begin investing and interacting with, and is one of the safest options analyzed; while Alkemi Network or Maple Finance might be best suited for institutions still requiring KYC/AML and other regulatory requirements but want to benefit from higher return. Finally, Coinchange presents the opportunity for anyone, regardless of their financial means, knowledge, or regulatory requirement, to take advantage of passive income possibilities in DeFi through secured and automated strategies. Coinchange enables businesses, institutions, or individuals entering the DeFi space to earn a higher yield/APY with their money.

For a more in-depth view of the topics covered, download our research paper here.*

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