Traditional financial institutions will soon be able to make further forays into the realm of decentralized finance (DeFi), thanks to the collaborative efforts of a number of businesses and a research hub that has the backing of Italy’s central bank.
Recently, Cetif Advisory, a research consultancy that assists banks, insurance companies, and other traditional finance firms in adopting digital solutions, disclosed that it is receiving valuable support from the Milano Hub.
Cetif Advisory helps banks, insurance companies, and other traditional finance firms adopt digital solutions; a research center that has the support of the Bank of Italy is known as the Milano Hub. They are collaborating in order to construct what they call the “Institutional DeFi for Security Token” ecosystem.
This means that the consortium of companies is working together with the research hub to develop a system that will assist traditional financial institutions in better understanding DeFi and participating in it through the use of security tokens.
By making this move, the goal is to close the gap that exists between conventional finance and the space occupied by decentralized finance, thereby opening up new doors of opportunity for both of these spheres.
The project aims to establish a “secure and accessible operating environment” that is catered specifically to institutional players through a collaborative effort with other companies, such as Polygon Labs and the digital asset platform Fireblocks.
This endeavor is being carried out in conjunction with these two companies.
In a statement, Imanuel Baharier, who is the general manager of Cetif Advisory, made this announcement. The primary objective of the project is to create a secure and open environment, within which institutional participants will be able to confidently participate in a variety of financial activities connected to blockchain technology and digital assets.
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When retail investors participate in decentralized finance, they frequently find themselves navigating unregulated territories that present excessive risks to conventional businesses. The risks associated with operating in these environments frequently cancel out any potential advantages.
Baharier explained to Decrypt that Cetif’s protocol will incorporate elements that are common to traditional businesses in order to address this problem.
These elements include established procedures for know-your-customer (KYC) and anti-money laundering (AML). They hope that by doing so, they will be able to create an environment that is safer and more regulated, which will attract these companies.
In his presentation, Baharier emphasized that their ultimate goal is to make the platform available to a larger audience by the year 2024. This entails granting permission for testing of the tokens they are developing on secondary markets in the real world.
In essence, they want to build an environment that closes the gap between the traditional financial world and the decentralized market. This environment would provide a route that is safer and more regulated for retail investors as well as businesses that want to take part in decentralized finance.
Baharier assured Decrypt that “we strongly believe this is a crucial moment for us to establish our position as a leading player in the emerging security token market”.
This project received assistance from the Milano Hub beginning on July 3 and will continue to receive assistance for the next half a year. This support does not include financial assistance; however, it does provide access to consultants who are knowledgeable in financial regulation.
In addition to this, the hub will lend a hand in the organization of events to further the progress of the project.
Creating a security token that is tailor-made for use on the protocol is one of the primary focuses of the project. In order to accomplish this goal, significant assistance will be provided by several of Italy’s most prominent financial institutions, such as Banca Mediolanum and the private bank Intesa Sanpaolo.
According to Baharier’s explanation, these businesses will play an essential part in bringing security tokens to primary markets and, later, in easing the entry of those tokens into secondary markets.
Baharier said this will happen in two stages. Importantly, the support and credibility of these highly regarded financial firms will be backed up by these tokens, which will increase their value.