Traditional banks, according to Sang Lee, have already been left in the dust by blockchain technology advancements, but adoption remains low owing to a number of problems.
According to one industry insider, decentralization will be one of the most important factors if crypto capital markets are to become institutionalized.
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Suppliers and those in need of funds meet in capital markets to conduct ostensibly efficient transactions. Savings and investments are frequently channeled between fund providers, such as banks, and those that want capital, such as enterprises, governments, and people.
Sang Lee, co-founder of VegaX Holdings, a crypto financial services provider, told on Monday that established financial institutions have simply been left behind by the crypto industry’s quick rise.
VegaX Holdings is developing a crypto-based financial services platform. Staking is possible on its VegaX decentralized finance (DeFi) technology, and the Konstellation ecosystem is a DeFi ecosystem built on Cosmos.
Lee feels that decentralization will be the most essential factor in assisting crypto’s entry into capital markets. Decentralization entails eliminating inefficient middlemen from decision-making and transaction execution.
“You can’t send a wire on the weekend, which is horrible,” Lee said of the present condition of centralized payment services. Furthermore, the number of times a stock changes hands when you acquire it is abysmal.” He continued:
We’ve progressed far enough that we no longer require human intermediates. It used to be required, but not any longer.
Intermediaries have a tendency to raise the number of fees paid and the time it takes to make an investment, thereby lowering prospective profits. Decentralization may be a possible method to make markets more efficient and help investors achieve greater returns by removing them.
Stablecoins, according to Lee, will be critical in growing crypto’s capital markets. Because most stablecoins, such as Tether (USDT) and Dai (DAI), are still pegged in US dollars, he believes stablecoins have the most potential to leapfrog other digital assets and even fiat money.
Stablecoins, he said, provide investors with a global unit of account with which to deal. Stablecoins, on the other hand, are something that everyone will use since they provide a feeling of stability, especially if markets grow frothy. Lee stated:
A stablecoin serves to smooth things out in an economy where things are becoming murkier and more difficult to trace.
Circle’s USD Coin (USDC) is the world’s second-largest stablecoin by market value, and it has already begun to make a move to penetrate financial markets with the help of new partner BlackRock.
In the end, Lee believes that money, people, and things will flow from traditional finance to blockchain, rather than the other way around. He phrased it like way:
Crypto will very certainly refuse to join the existing system. Things will travel on-chain from off-chain, but not backwards.
He does feel, though, that “DeFi and crypto markets need to be a lot more efficient” in order to enable the pace of adoption rise as the technology advances. According to him, “unusable” services aimed to help unskilled people move cash into crypto cause a lot of inefficiencies. He continued:
Because there is no method to access to the highest performing asset class in history, people are avoiding it. Adoption would be much higher than it is presently if platforms were more user-friendly.
Token bridges are required to get goods onto the blockchain and into crypto, something Vitalik Buterin expressed worry about in early January. They’ve also been the victim of many security breaches in 2022, resulting in losses of about $1 billion.
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Regardless, Lee considers them to be an important component of the capital markets infrastructure. “We need bridges to expand capital markets,” he continued, “but the problem is that most bridges are pseudo-centralized.”