Cedefi for banks: Making sense of a decentraliSed world

A combination of centralised and decentralised financial systems and components, driving constant and rapid innovation while ensuring regulatory compliance, will likely be the future of financial services. Today, banking entities operate naturally within a centralised structure. But we believe that even a centralised bank can decentralise some of its functions and successfully deliver elements of its business without losing overall control, thus creating a new construct – centralised/decentralised finance, or CeDeFi.

It’s certain that the topic of how and where to decentralise in the overwhelmingly centralised and regulated financial services world is a complex one. The best way to ensure all are on the same page is agreement on and understanding of a common lexicon, or taxonomy, describing the key component pieces at play in the decentralised finance (DeFi) space today. Then, discussion and decision making can move smartly forward about where to overlay decentralised solutions on one or multiple offerings within a bank’s centralised portfolio.

In this paper, along with Aite-Novarica Group, we explore the elements of a robust taxonomy for DeFi as well as a number of specific business opportunities where a decentralised approach can yield substantial positive results for banks and their customers, even inside a centralised enterprise. Key next steps for success in a CeDeFi world are outlined for both banking institutions and solution providers.