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The growth of decentralised finance will continue to foster new and innovative developments in the financial services space in 2022, driven primarily by increased accessibility and attractive yield.
The decentralised finance ecosystem comes with numerous advantages, among them speed of use.
I recently spent time setting myself up in a crypto exchange to better understand how it all works. Establishing access, addressing KYC requirements, converting fiat into a digital currency and putting it all into a decentralised finance marketplace all seemed relatively straightforward
The process itself took less than five minutes. Accessibility is a key advantage of de-fi.
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Future
We’ve barely scratched the surface of the opportunity defi is going to bring to the banking sector. Smart people will continue to use the tech to deliver financial services that don’t exist today. Others will take existing products and completely reinvent them with decentralised finance.
Opportunity
At ANZ, we’re closely looking into the de-fi space for opportunities we think can help our customers further their business. We’re well experienced across the entire cryptocurrency landscape, thanks to the success of projects including Lygon, ANZ's blockchain-based solution aimed at simplifying the process around bank guarantees.
The bank has set up a dedicated team which is exploring products and solutions for digital assets and currencies. We are currently working with multiple use cases in the Asia-Pacific region to explore what we can offer to our customers to help their businesses.
The success of that work was recently recognised in a fintech challenge we participated in hosted by the Monetary Authority of Singapore. The challenge related to how central bank digital currencies can solve specific problems related to financial inclusion and sustainability.
ANZ’s entry was one of approximately 300 from over 50 countries, and we’re proud to say we were shortlisted as one of the finalists. And while we ultimately did not win, we learnt a lot from the experience of participating.
ANZ’s entry involved a working prototype of a system which allows people to use its existing personal identifications systems to register for central bank-issued digital wallets. We also created a mechanism which can be used offline, a critical factor for financial inclusion.
Now we are exploring the next stage of the technology and how it can benefit our customers, which is something we are very excited excited about.
At some scale this is already happening. The emergence of flash loans is a key example of this - through the use of smart contracts, loans can be completed without the involvement of humans in the transaction, in a fraction of a second.
In traditional banking, money is leant with an understanding of the customer, the purpose of the fund and in some cases the sue of the funds is monitored. Flash loans will likely only have value for very specific circumstances, but their use shows how drastically de-fi is changing how financial services works.
That’s what de-fi is enabling the market to do. And you’ll see more of these developments through 2022.
After an unprecedented 2021, this year will be a critical one for global markets. The post-COVID landscape is one of rapid technological change, a transformational shakeup of global trading orthodoxy and an increasing focus on sustainable business.
At ANZ Institutional, we aim to help our customers put themselves in the best possible position to take advantage of these forces. Our subject-matter experts provide thought leadership in a range of complex areas from across more than 30 markets.
As 2022 begins, we are asking our experts about the factors they see shaping markets and industry – and the opportunities and challenges within. We’ll be sharing the responses with you over the coming weeks.
Hari Janakiraman is Head of Trade Product, Institutional at ANZ
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