The activity in the crypto space is picking up. October saw the highest monthly spot trading volume on centralized exchanges since March 2023 and the highest month-on-month percentage rise since January 2021, as per today’s report by CCData. The same study shows that BTC and ETH options volume on the CME rose 142% and 107% to $1.75bn and $532mn, respectively. This was an all-time high for both products.
(Crypto) spring is in the air, which naturally raises the question of the next cycle’s priorities and directions. European Blockchain Convention, which has recently concluded in Barcelona, could offer some insights on this topic. The event was heavily centered on crypto finance in all its iterations: DeFi (decentralized), CeFi (centralized), and TradFi (traditional).
Here’s an overview of the main trends in European crypto finance, as seen at the conference, both on and off the stage.
DeFi: privacy and compliance
For a long time, privacy and regulatory compliance have been viewed as nearly incompatible attributes. And yet, they are both important for the DeFi space.
This conundrum encouraged numerous technological experiments, where developers of privacy-centered protocols brought in compliance possibilities. Alephzero chose to closely collaborate with regulators, Secret Network used zk (zero-knowledge) disclosures, and Panther Protocol enabled a voluntary data-sharing mechanism. While not specifically focused on the DeFi, these protocols can serve as a base for DeFi applications.
Biokript, an exchange, tackled this issue by combining the characteristics of both centralized and decentralized exchanges.
Interoperability is still an important direction, with services like expand.network and Paraswap offering access to multiple DeFi protocols through one API, drastically improving user experience.
CeFi: diversification and user experience
User experience was also at the heart of the CeFi firms’ preoccupation. At the conference, Codego was offering various white-label solutions for firms and banks willing to use crypto, Fireblocks presented its custody solutions, while Taurus and Unicoin concentrated on tokenized assets investments.
Interestingly, the number of small crypto exchanges present at the conference was remarkably high: Bit2me, zondacrypto, Cryptology, Bitvavo, WhiteBit … As Binance’s dominance decreases and compliance becomes the biggest hurdle, regional exchanges can seize the opportunity.
Venture Capital firms, such as Outlier, Fabric, Coinbase, AngelBlock, and Deus X Capital have discussed the sobering effects of the bear market on private equity. Unsurprisingly, it resulted in higher requirements for startups, including more mature proofs of concept and a well-established community.
Among the key areas of VCs interest, zk technology was leading, together with user-friendly layer-1s, and new trends, such as DeCom. Short for Decentralized Commerce, it describes the projects that introduce decentralized tools to e-commerce.
TradFi: investment and tokenization
Institutional presence at this edition of the European Blockchain Convention has beaten all records. One could spot representatives of most major financial institutions, such as BPI, Credit Agricole, BNP, Caisse des dépôts, UBS, Banco Santander, Standard Chartered, Citibank, DZ Bank.. Insurers like AXA and custodians like CACEIS were present too.
The aspirations of these actors could be resumed in the words of a representative of TP ICAP, the world’s largest broker-dealer. It launched its crypto department in 2017 based on two hypotheses: “Crypto will become an institutionally investable asset class” and “Financial markets infrastructure for traditional asset classes will be disrupted through tokenization”. Six years later, more and more financial companies seem to agree.
The crypto market started as a retail movement, but it is now rising to the institutional level. This is vividly illustrated by the change in clientele: a few years ago, specialists like Fidelity provided crypto services mostly to high-net-worth individuals. Over time, these clients have brought in their family offices, and then their hedge funds, and then it was the turn of traditional asset management and pension funds.
Real-world asset tokenization has been a key topic for virtually any discussion involving institutional actors. The firms are actively exploring their opportunities, and unlike several years ago, they do not mention “private blockchains” or similar notions anymore. It looks like the idea that a blockchain could be permissioned has disappeared from the institutional actors’ radar, allowing them to concentrate on the tech that works.
All in all, the long bear market seems to have forced the companies to focus on making a better product, while institutional players have finally decided to embrace the blockchain instead of fighting it.
D.Center
