Siam Commercial Bank President Arak Sutivong believes DeFi needs a structure to integrate with the rest of the financial ecosystem.
Arak Sutivong, CEO of SCB 10X and President of Siam Commercial Bank (SCB), spoke about how one of the largest venture capital funds in Southeast Asia looks to the future of DeFi.
The derivatives market in the traditional market is valued at about $ 640 trillion (the value of outstanding derivatives contracts). Derivatives, which have gained particular popularity among investors and traders over the past 40 years, help fill the market with liquidity and hedge risks.
As the cryptocurrency market developed, derivatives linked to cryptocurrencies began to appear, but their more active use is hindered by the specificity of cryptocurrencies: high volatility, large spread between the buy and sell prices, excessive risks of complete loss of assets.
Due to these factors, there is a shortage of option sellers in the cryptocurrency market and too high premiums, which negate the whole point of using such derivatives. The DeFi sector and decentralized exchanges can be a stabilizing factor for the market.
In his opening remarks at the second annual DeFi SCB 10X Global Virtual Summit, REDeFiNE, Sutivong emphasized that the decentralized finance industry has “exploded into the mainstream in many ways.”
The DeFi sector has grown tenfold over the past six months, with more than $ 100 billion in the DeFi ecosystem this year. Sutivong said many other metrics, including user count, trading volume on decentralized exchanges and DApps development, are seeing “tremendous growth.”
However, despite the positive developments, the nascent industry “has some areas of concern, such as fraud, that we hear about in the press all the time, from industry players and regulators.”
In his opinion, solving this problem in the medium and long term presents certain problems:
“DeFi, by definition, cannot be fully regulated. Instead, there must be a foundation for integrating DeFi with the rest of the financial ecosystem. ”
Dr. Sutivong’s opinion on the DeFi regulatory approach was formed after a series of hostile regulatory interventions.
In early June, the World Economic Forum released a DeFi policy guide that recommended measures to reconcile competing needs such as decentralization and privacy while preventing illegal activities such as money laundering.
During the same period, Commissioner of the US Commodity Futures Trading Commission, Dan M. Berkovitz, stated that DeFi derivatives platforms may violate the country’s Mercantile Exchange Law and, therefore, be illegal.
New regulatory measures could significantly restrict the development of DeFi tools and entail significant costs for DeFi startups, preventing smaller players from entering the market.
