Centralized finance (CeFi) will continue to be an important avenue to drive the adoption of decentralized finance (DeFi) services in the future, but regulatory considerations remain a significant part of the process.
This was a key theme that emerged during a panel titled ‘How to Do CeFi Right – the Balance Between TradFi & DeFi?’ at Paris Blockchain Week. A handful of industry experts weighed in on the current state of CeFi and DeFi, their relationship and importance for the future of the space.
Eric Turner, vice president of market intelligence at Messari, highlighted the core difference between the two terms, which have become somewhat overlapping in recent years given the link between centralized exchanges and decentralized platforms:
“When you think about what we consider CeFi today, it’s the centralized exchanges. It’s people that are offering custody services and lending services. But if it’s between DeFi and CeFi, you know, all of those services can be built in different ways.”
Turner also highlighted CeFi’s role as the main onramp for the ‘next billion users’ in terms of a fiat entry mechanism as well as a trusted avenue for larger professional investors to move into the crypto space.
Joaquin Sastre, BitGo’s LatAm & EMEA managing director, said that the institutional-focused wallet platform sees a key difference between the two categories:
“What really matters here, to differentiate between CeFi and DeFi from our view, is really the access and the storage.”
Sastre maintains that adoption of DeFi protocols and platforms will be a natural progression, while CeFi continues to give regulators a means to offer some protection institutions through controls and legal parameters.
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Ian McAfee, co-founder and CEO of Shift Markets, highlighted the importance of what CeFi platforms and DeFi protocols have to offer while suggesting the terminology itself serves more to describe and capture what the technology could do:
“Finance will just be using blockchain 20 years from now, right? So these words are just kind of going to evaporate.”
Charlie Meraud, CEO of cryptocurrency market maker Woorton, believes that the two are becoming intrinsically linked, moving on from the original drawcards of DeFi which…
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