As the world of crypto continues to evolve, institutional investors are increasingly looking to Decentralized Finance (DeFi) to ensure better asset transparency and security. The recent failures of centralized crypto firms have resulted in a growing demand for a more secure and transparent investment environment, and DeFi is seen as the solution. In this post, we will delve into the reasons why institutional investors are embracing DeFi and why it is becoming an increasingly popular choice.
Avantgarde conducted a survey among 50 US institutional investors with a minimum investment of $5 million in crypto assets. The study showed that two-thirds of the respondents had at least $50 million in assets under management. The study also revealed that about 53% of C-suite executives saw ensuring asset transparency as a crucial factor in their investment decisions. In addition, 70% of the chief financial officers surveyed stated that finding a qualified and experienced DeFi asset manager was crucial.
Many institutional investors are concerned about the proof of reserves and control of assets or private keys, with half of the institutions surveyed saying that these two factors would influence their decision to allocate assets to crypto. The shift towards DeFi comes after the bankruptcy of crypto exchange FTX and the recent failures of centralized crypto firms, which have resulted in the need for a more secure and transparent investment environment.
The Role of DeFi:
The study showed that despite the willingness to adopt DeFi, DeFi-native asset management professionals would be necessary to secure the investments. The value proposition of DeFi, including its transparency, auditability, composability, permissionless nature, and options for self-custody, is seen as a major advantage over the traditional financial model.
The survey results come as various financial services giants are exploring the use case of blockchain technology, especially tokenization. This shift towards DeFi highlights the increasing demand for a secure and transparent investment environment for institutional investors. As the CEO of Avantgarde, Mona El Isa, said, “We truly believe that the value proposition of DeFi and the blockchain will make the heritage financial model obsolete.” The increasing interest in tokenization, as indicated by the surveys, indicates that the next generation of markets will be dominated by tokenized securities.
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