The coming together of decentralized finance (DeFi) and asset management marks a major shift in the world of finance.
DeFi’s decentralized and transparent architecture offers a compelling alternative to traditional financial systems. It could improve asset management, provide investors with better returns and make investment opportunities more widely accessible – not just to institutional players but also to individuals.
The growth of DeFi has caused traditional asset management firms to cautiously consider the potential benefits of DeFi integration. But what challenges do institutions and individuals face when entering the DeFi space and what can drive institutional adoption of DeFi? In this interview, Vasily Nikonov, the CEO of Velvet Capital, a decentralized asset management platform, shares his thoughts on the details and opportunities for institutions and retail investors using DeFi.
Cointelegraph: BlackRock believes institutional adoption of DeFi is still many years away. Do you agree with that?
Vasily Nikonov: It depends on what type of institution it is and where in the world it is located. Due to regulatory uncertainty, DeFi adoption at larger US institutions like BlackRock is likely three years away. However, smaller players in Asia and the Middle East are already actively exploring DeFi and testing new products.
CT: What do you think can drive institutional adoption of DeFi?
VN: The genie is out of the bottle – DeFi is inevitable. Asset management, a multi-trillion dollar sector, is poised for an era of change, with an estimated $8 to $19 trillion in assets both native to Web3 and from the real world expected to be acquired within the next decade. will be on the blockchain. More and more professional asset managers are aware of the need for robust on-chain financial rails to manage these assets and are actively engaging with DeFi.
Source: Velvet Capital
Greater clarity and regularity will accelerate this process – with a strong focus on the United States. But beyond that, institutions need professional DeFi toolkits. Velvet Capital is here to provide the tools and infrastructure to enable this transformation.
CT: What challenges do institutions face when entering the DeFi space?
VN: Institutions face many challenges in DeFi that are not prevalent in TradFi. For example, over $1 billion has been hacked from DeFi protocols so far in 2023, a risk that is not as common in TradFi. These hacks include bridges, compromised keys, drained liquidity pools, and more.
Another challenge is custody. Institutions, particularly those based in the US, are not legally allowed to hold their own funds and are required by law to have a custodian. For example, Rule 206(4)-2 requires financial advisors to protect client funds and securities in their possession or over which they are permitted to dispose. This rule makes it nearly impossible for US financial advisors to interact with DeFi protocols on behalf of their clients as they have to use a third-party custodian.
CT: How does Velvet Capital deal with all these challenges?
VN: Velvet Capital prioritizes security by implementing a comprehensive, multi-layered security strategy, including audits by independent security firms such as PeckShield and Shellboxes. To further improve security, we launched a bug bounty program to incentivize white hat hackers to identify and report vulnerabilities in our contracts. In addition, we use real-time security monitoring solutions such as Forta, Open Zeppelin and Tenderly to quickly detect and respond to potential threats.
With regard to regulatory uncertainty, we recognize the need to adapt to the evolving regulatory landscape. Although we cannot directly influence the policies of unfavorable jurisdictions, we have implemented features such as multisig vaults and optional KYC and understand your counterparty's protocols to meet regulatory requirements and improve compliance for institutions in specific regions. Nonetheless, we value collaborating with institutions in jurisdictions that foster a supportive environment for DeFi innovation.
CT: How is Velvet Capital different from other decentralized asset management platforms?
VN: Institutional adoption of DeFi is not possible without a professional toolkit. This is where Velvet Capital comes into play. We stand out from the competition with our superior flexibility, functionality and user interface.
We provide all the infrastructure necessary to easily create and manage DeFi products. Everyone could benefit from professional DeFi infrastructure. The Velvet Marketplace is open and allows anyone to set up their own vault and seamlessly manage a personal DeFi portfolio.
For larger institutional investors who want to leverage our DeFi operating system while maintaining their own brand and customer relationships, we offer a white-glove DeFi-as-a-Service solution that white-labels the use of Velvet infrastructure -Base allows.
Source: Velvet Capital
CT: Can you explain how Velvet Capital’s omni-chain DeFi operating system works and what its key features are?
VN: We provide a seamless and easy-to-use platform that enables anyone to create, manage and launch on-chain funds, structured products and tokenized portfolios. Velvet allows users to consolidate their DeFi interactions on a single platform and optimize returns through lending, staking or liquidity provision across different assets and ecosystems.
The Velvet Marketplace serves as a central hub for exploring high-performance DeFi vaults and creating customized vaults tailored to individual strategies. Asset managers can quickly set up new vaults by selecting the parameters that suit their goals.
Additionally, Velvet Capital offers a range of advanced features that enhance the DeFi experience, including superior on-chain trade execution, effortless intent-based yield farming, native account abstraction, comprehensive KYC/KYB permissions features, omnichannel presence with derivatives strategies, access to Real -World Assets (RWAs) and an upcoming API layer.
Source: Velvet Capital
CT: What role does Velvet’s native governance token play in decision-making processes related to institutional services/functions/partnerships?
VN: Velvet introduces a new tokenomics model called ve(3,3) that combines the vote-escrow mechanism with (3,3) staking to encourage long-term commitment and incentivize growth. The model aligns the interests of token holders, vault investors and vault managers.
Our native VLVT token has not yet launched but will be used to reward vault managers, investors and referral program participants. Users can stake VLVT to earn veVLVT, a voting fiduciary token version, to vote on Velvet DAO decisions and receive VLVT rewards for voting.
Source: Velvet Capital
CT: Are there any specific strategies or DeFi products tailored to institutional clients that Velvet Capital is looking to launch in the near future?
CT: Velvetl’s institutional product has successfully launched, marking an important milestone for the platform. With notable growth metrics, including a top spot among BSC ecosystem projects in terms of monthly TVL growth on DefiLlama, Velvet is positioned for further expansion. It is planned to be deployed on the Arbitrum, Optimism and Ethereum mainnet in the coming months to further solidify Velvet's presence in the DeFi landscape.
Disclaimer. Cointelegraph does not endorse any content or products on this site. Although we strive to provide you with all the relevant information we have been able to obtain in this sponsored article, readers should conduct their own research before taking any company-related actions and assume full responsibility for their decisions. This article also cannot be considered investment advice.
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.