Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Web3, Decentralization, DAOs
Federal Judge Rules Against Terraform labs
Crypto | Jan 2, 2024
Image by Freepik
A New York judge has granted the SEC a summary judgment over the claim that Terraform sold unregistered securities
- Judge Jed Rakoff ruled that four crypto tokens offered by Terraform Labs, including UST and LUNA, wLUNA, and MIR were unregistered securities based on the Howey test, a Supreme Court precedent for defining investment contracts.
- Terraform Labs, during the crypto bull run of 2021, was a significant player in the crypto space, but faced a dramatic downfall with the collapse of UST in 2022. The SEC has sued Terraform Labs and co-founder Do Kwon in February 2023 for orchestrating a multibillion-dollar securities fraud.
- The jury trial is scheduled to begin in January 2024.
- The decision diverges from a separate ruling in the Southern District of New York regarding the XRP token.
Terraform Labs spokesperson in an email to The Block:
"We strongly disagree with the decision and do not believe that the UST stablecoin or the other tokens at issue are securities. Further, the SEC’s fraud claims are not supported by evidence, and we will continue to vigorously defend against those meritless allegations at trial."
Outlook
The divergence in legal interpretations between different courts, as seen in the Ripple case and now Terraform Labs, adds complexity to the regulatory environment for crypto assets. The Terraform Labs summary judgment strengthens the SEC's approach to treating certain crypto assets as securities, potentially setting a precedent for future cases.
See: Moody’s Analytics on Stablecoin Depegging
The case puts a spotlight on algorithmic stablecoins, a relatively new and complex type of crypto asset, and their regulatory treatment. The denial of summary judgment on fraud claims suggests a protracted legal battle ahead, with significant implications for Terraform Labs and its stakeholders and possible precedent that could shape the future of digital asset regulation. It is imperative for regulators, companies, and investors to engage in constructive dialogue to establish a regulatory framework that balances innovation with investor protection.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Blockchain Private Credit Grew 55% in 2023
Crypto Lending | Dec 20, 2023
Image: Unsplash/Traxer
In 2023, the crypto sector witnessed a remarkable rebound in private credit, with a 55% increase since the start of the year
This resurgence is particularly notable given the backdrop of last year's crypto crisis and the current environment of elevated interest rates. According to Bloomberg News, active private loans via digital ledgers have escalated to about $408 million as of November 28, 2023. This growth, tracked by RWA.xyz (See: Active loans value by procotcol), is significant though it still trails the near $1.5 billion peak of June last year and is a fraction of the traditional $1.6 trillion private credit market.
See: ‘Mugshot Edition’ Trump NFTs Blending Politics, Memorabilia and Digital Assets
Blockchain-based private credit offers lower borrowing costs compared to traditional credit, with some protocols charging less than 10%. This affordability, coupled with increased transparency and efficient liquidation mechanisms, makes blockchain-based credit increasingly attractive.
Industry Perspectives
Traditional private credit has been criticized for its opacity, as noted by Pimco and the European Central Bank. In contrast, blockchain protocols offer more transparency and faster liquidation processes, making them more appealing to borrowers and investors alike.
In the blockchain iteration of private credit, platforms including Centrifuge, Maple Finance, and Goldfinch facilitate the aggregation or provision of investor capital. Commonly, these protocols employ the Ethereum blockchain and stablecoins such as USDC, which are anchored to the US dollar's value. Borrowers then access these funds, adhering to conditions embedded within smart contracts.
See: TransUnion Offers Credit Scores for DeFi Borrowers Utilizing Crypto Assets
These protocols adopt measures like loan structuring or backing loans with tangible assets, enhancing the trust of investors. Data from RWA.xyz shows that consumer, auto, and fintech sectors are leading in blockchain-based private credit utilization, followed by real estate, carbon projects, and crypto trading.
Outlook
The crypto industry still faces challenges, including banking access and the absence of a credit rating system in crypto lending. However, the industry is adapting, with platforms like Maple Finance and Goldfinch providing innovative lending solutions. The 55% jump in private credit within the crypto sector in 2023 shows the sectors resilience and adaptability.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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‘Mugshot Edition’ Trump NFTs Blending Politics, Memorabilia and Digital Assets
NFTs | Dec 15, 2023
Image: Unsplash/Library of Congress
In a move that blurs the lines between politics, memorabilia, and the burgeoning world of digital assets, former U.S. President Donald Trump has launched a the 'Mugshot Edition' Suit NFT Collection
- On offer, 100,000 digital collectible cards, minted on polygon, called the "Mugshot Edition" are being sold by NFT INT, the official licensee of the Trump name and image for digital trading cards.
See: El Salvador Update: ‘Volcano Bonds’, Bitcoin City, Crypto Visa Program
- Each card is being sold for $99, however for customers who purchase the entire set of 47 cards for $4,653, they will also receive a physical collectible card in the mail including 1 piece (of 2024 pieces) of the infamous blue suit and red tie Trump wore when the now famous 'mugshot' photo was taken. This innovative approach to NFTs combines physical memorabilia with digital ownership, a concept that is relatively new in the world of digital assets.
Trump announcing that if you buy all 47 of his new ‘Mug Shot Edition’ digital cards for $4,653, you will get an autographed piece of the suit he wore when he was arrested. pic.twitter.com/zpuoYCF6dS
— Ron Filipkowski (@RonFilipkowski) December 12, 2023
Reaction
The launch of Trump's "Mugshot" NFTs has stirred up prices for his previous NFTs, indicating a significant market reaction. This move has been seen as an attempt by the former president to profit from his recent legal scandals, tapping into the burgeoning crypto market. The collection has sparked a range of reactions, from enthusiasm among collectors and Trump supporters to skepticism and criticism from others.
See: LA-Based Entertainment Company, Impact Theory, Faces SEC Charges Over Unregistered NFT Securities Offering
You can check out the trump collection market value and NFT price at nftpricefloor. As the world of NFTs continues to expand, it will be interesting to see how other public figures and historical events are immortalized in this digital format.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Ledger’s Hardware Wallet Exploited
Crypto | Dec 15, 2023
Image: Unsplah/Azamat E
A Wake-Up Call for Crypto Security. On December 14, Ledger's Connector Kit software was exploited.
Ledger, known for manufacturing physical cryptocurrency wallets resembling USB drives and other storage devices, was compromised affecting multiple Ethereum-based applications, including Zapper, SushiSwap, Phantom, Balancer, and Revoke.cash, due to a security breach in Ledger's system.
While the exact number of affected decentralized apps (dapps) and the total financial loss are still being assessed, anecdotal reports suggest widespread exploitation. Blockaid, a blockchain security firm, estimated losses of over $150,000 in crypto due to this unique “supply chain attack” on Ledger’s Connect Kit. Others reported the draining of over $600,000 from users' wallets.
See: Jamie Dimon Advises Government to ‘Close Down Crypto’
Ledger CEO Pascal Gauthier described the hack as an “isolated incident” and fixed the malicious code and promised stronger security controls. The exploit, which lasted less than two hours, was attributed to a phishing attack targeting a former employee. Ledger assured that their hardware and Ledger Live platform were not affected. They advised users to use the “Clear Sign” feature for transactions to ensure direct interaction with Ledger’s software.
FINAL TIMELINE AND UPDATE TO CUSTOMERS:
4:49pm CET:
Ledger Connect Kit genuine version 1.1.8 is being propagated now automatically. We recommend waiting 24 hours until using the Ledger Connect Kit again.
The investigation continues, here is the timeline of what we know about…
— Ledger (@Ledger) December 14, 2023
The crypto community's response, including assistance from entities like Tether and Chainalysis, highlights the collaborative effort in addressing such security breaches. These breaches not only affect individuals and projects but also tarnish the reputation of industry. Security expert Steve Gibson emphasized the need for skepticism in an industry with a history of significant hacks.
Moving On
The Ledger hack is a reminder of the ongoing challenges in ensuring the security of digital assets. Users are advised to exercise caution and stay informed about the security of their digital assets, especially when interacting with decentralized applications.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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A16z’s 2024 Big Ideas for Fintech, AI and Crypto
Innovation | Dec 6, 2023
Image: Unsplash/Brad Switzer
A16z insights for 2024 highlight a future where these technologies become a fundamental part of society and converge to create more efficient, creative, and secure systems
As we step into 2024, A16z has furnished us with their annual big idea predictions of the future with the landscape of fintech, AI, and crypto being poised for transformative change. Fintech is increasingly becoming developer-driven, reshaping the industry's infrastructure with a focus on enhanced user experiences and open-source innovation. This shift not only empowers fintech companies but also positions them to better serve community and regional banks, revolutionizing financial services with advanced software solutions.
In the realm of AI, we're witnessing a significant leap in healthcare, where AI-enabled platforms are set to overhaul outdated systems, promising more efficient and effective patient care. The democratization of creativity through AI is another milestone, breaking down barriers in artistic expression and design. Moreover, the interpretability of AI models is becoming a focal point, ensuring these technologies are not just powerful but also understandable and controllable.
Last Year: a16z: Big Fintech Ideas to Tackle in 2023
Crypto, no longer confined to financial niches, is emerging as a fundamental component across various sectors. Its integration with AI, the evolution of gaming economies, and advancements in verification methods like SNARKs. From enhancing the authenticity of digital content to revolutionizing smart contract development, crypto is set to become more accessible, secure, and integral to technological and societal systems.
The Future of Fintech and AI
The Rise of the Developer in Financial Services
- Developers are becoming key influencers in the purchase of financial services infrastructure, and the trend is reshaping how financial services infrastructure is bought and sold, favoring fintechs that prioritize a great developer experience. Fintech companies are increasingly focusing on creating developer-friendly environments, including open-source solutions and developer sandboxes.
"For fintech companies that pride themselves on a great developer experience, this will play to their advantage." - Angela Strange, General Partner at Andreessen Horowitz
See: Super Apps Are Redefining Daily Life
Empowering Community and Regional Banks
- Fintech tools are poised to help community and regional banks compete with larger banks. These tools will assist in managing balance sheet risks and improving client services. This is particularly crucial as one-third of small business bank lending is provided by regional banks.
Revolutionizing Financial Professional Services
- The professional services in financial sectors, such as accounting, tax advising, and wealth management, are set to be transformed by generative AI and LLMs. These technologies will automate tasks like data collection, research, and report generation, shifting the human role towards specialized expertise and client engagement.
AI-Enabled Healthcare Platforms
- AI is expected to revolutionize healthcare by enabling value-based care. The integration of AI in healthcare, which currently relies on outdated technologies like pagers and fax machines, is set to improve efficiency and patient care significantly.
Image: Unsplash/Jr Korpa
Democratizing Creativity with AI
- Generative AI is transforming the creative process, making it accessible to everyone. This technology enables rapid prototyping and ideation across various forms, including text, visual, and audio. In 2024, these AI tools are expected to make creative expression even more widely accessible.
AI in Robotic Process Automation (RPA)
- AI is set to enhance RPA systems, making them more intelligent and adaptable. This advancement will allow for more robust solutions in automating repetitive tasks across different industries.
AI Interpretability
- As AI models are deployed in real-world situations, understanding their decision-making process becomes crucial. The focus in 2024 will be on reverse engineering AI models to understand their outputs and control their actions.
"The big question is: why do these models say the things they do? Why do some prompts produce better results than others?" - Anjney Midha, General Partner at Andreessen Horowitz
Image by Freepik
The Future of Crypto
These insights from a16z for 2024 highlight a future where crypto is not just a financial tool but a fundamental part of various technological and societal systems, from gaming to brand identity and beyond.
See: CRA Tax Implications for Individuals and Crypto Platforms
The integration of AI, the evolution of gaming economies, and the advancement in verification methods are set to redefine the landscape of crypto, making it more accessible, secure, and integrated into our daily lives.
Decentralization and Governance
- Decentralization is key for democratizing systems, promoting competition, and user choice. However, achieving it at scale has been challenging. New models for decentralization are emerging, accommodating richer applications and effective governance, potentially leading to unprecedented levels of decentralized coordination and innovation.
User Experience in Crypto
- The complexity of crypto UX has been a barrier to mainstream adoption. Developers are testing new tools to simplify crypto UX, such as passkeys for easier app sign-ins, smart accounts, embedded wallets, and advanced RPC endpoints. These innovations could make crypto UX more user-friendly and secure than current web2 standards.
AI and Blockchain Integration
- Decentralized blockchains can counterbalance centralized AI, creating global markets for compute and data contribution. This integration could democratize AI, making it more accessible and safer for consumers.
"Crypto technology can be used to open the black box; track the origin of things we see online." - Andy Hall, Professor at Stanford.
See: PayPal’s Blockchain Vision As New Financial Rail
Evolution of Play-to-Earn Gaming
- The shift from 'play to earn' to 'play and earn' in gaming. To create games that are fun and allow players to capture value.
Formal Verification in Smart Contract Development
- The complexity and critical nature of smart contracts demand robust verification methods. New tools are emerging, improving the developer experience and leveraging smart contract architectural simplicity for robustness.
See: GBBC Publishes Latest Blockchain Law Journal Volume VII
NFTs as Ubiquitous Brand Assets
- Established brands are increasingly using NFTs as digital assets. Starbucks' gamified loyalty program and Nike's digital collectible NFTs. NFTs are poised to become widespread digital brand assets.
SNARKs Going Mainstream
- SNARKs (Succinct Non-interactive ARguments of Knowledge) provide a way to verify computational workloads. Recent improvements are making SNARKs more usable and viable for various applications.
Outlook
Together, these developments in fintech, AI, and crypto signal a future where technology is not just an enabler but a driver of efficiency, creativity, and security, reshaping how we interact with and benefit from these advanced systems in our daily lives.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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New Binance CEO’s First Thoughts + His Latest
Crypto | Dec 5, 2023
Image: Richard Teng, Binance CEO, Nov 2023
Binance's new CEO, Richard Teng, shares his outlook for the world's largest crypto exchange by volume
In a recent blog post titled "My First Blog as Binance’s CEO," the new CEO of Binance acknowledges the past challenges faced by the company, particularly in areas of compliance and regulation, and asserts that these have been pivotal learning experiences, making the company stronger and more resilient.
See: New York Takes Legal Action Against Major Crypto Firms
The CEO's message is one of transformation and responsible growth, focusing on user-centric values, regulatory collaboration, and a broader application of blockchain technology. He stresses the need for deeper engagement with policymakers to foster a globally harmonized regulatory framework, ensuring consumer protection and industry innovation. The commitment to maintaining a robust financial structure, prioritizing user asset protection, and driving the adoption of Web3 technologies underscores a strategic shift in Binance's approach.
Meet Richard Teng, Binance's new CEO
- Richard Teng, appointed as Binance's new CEO in November 2023, brings a wealth of experience from his over three decades in the financial services and regulatory sectors.
- His journey with Binance began in August 2021 when he took the helm as CEO of Binance Singapore.
- His role quickly expanded, overseeing significant regions such as the MENA and European regions, and eventually leading all markets outside the U.S. as the Head of Regional Markets.
- In this capacity, Teng was pivotal in forging strategic partnerships, nurturing an innovative ecosystem, and broadening the cryptocurrency ecosystem across these diverse regions.
See: Ex-Binance CEO CZ Faces Up to 10 Years in Prison
- Prior to his engagement with Binance, Teng's career was marked by notable leadership roles in regulatory bodies.
- He served as the CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market (ADGM), where he earned a reputation as an innovative regulator on the global stage.
- His extensive background also includes serving as the Chief Regulatory Officer at the Singapore Exchange (SGX) and as the Director of Corporate Finance at the Monetary Authority of Singapore.
- Teng's academic achievements are equally impressive, holding a Master's in Applied Finance with Distinction from the University of Western Australia and a First Class Bachelor of Accountancy from Nanyang Technological University.
- His diverse and rich experience in both regulatory and financial domains positions him uniquely to steer Binance through its next phase of growth and innovation.
- View bio
Quotes Signaling New Strategic Direction
"It is an honor and with the deepest humility that I step into the role of Binance’s CEO, succeeding the visionary founder of this incredible company."
- This statement reflects a respectful acknowledgment of the legacy CZ created. The new CEO aims to convey a sense of continuity while also bringing his own leadership style to the forefront.
See: Dispelling FUD: Why Binance’s Exit from Canadian Crypto Markets Strengthens Canada’s Ecosystem
"A cornerstone of this organization has always been the idea that innovation should bring value to users."
- Given Binance's past criticism for prioritizing growth over user protection, this quote emphasizes a renewed focus on user-centric innovation. It's a commitment to aligning business growth with tangible benefits for users.
"We have turned the page on Binance’s historical challenges and we are, in fact, stronger today than we have ever been."
- This statement addresses past regulatory and compliance issues under CZ's tenure. It's an attempt to reassure stakeholders that Binance has learned from its past and is now more resilient and compliant.
"As an industry, we require more focus than ever on collaborating with policymakers."
- Reflecting on the regulatory challenges faced previously, this quote underscores a strategic shift towards proactive engagement with regulators. It's a move to foster a more stable and regulated environment for crypto, which was a point of contention in the past.
"I am deeply committed to the promise of blockchain, such as the opportunities for increased financial inclusion, cross-border remittances, and reduced transaction costs."
- This highlights a vision for blockchain beyond just cryptocurrency trading, which has been a core focus of Binance. It suggests a broader, more inclusive approach to blockchain technology, aligning with global financial trends and addressing criticisms of being too narrowly focused on trading.
These quotes collectively signal a strategic shift in Binance's approach under the new CEO. They reflect a desire to move past the turbulence of CZ's era, which included regulatory scrutiny and compliance issues, and to embark on a path that balances innovation with user protection, regulatory compliance, and a broader vision for blockchain technology.
Although at his first major public interview appearance...
Although as reported in a recent CoinDesk article, Richard Teng seemed evasive in his first major public interview held by the Financial Times 'Crypto and Digital Assets Summit in London' since assuming the role of the new CEO of Binance. In the interview, Tent was notably reticent when pressed for details about Binance's governance, including the location of its global headquarters, whether the company would undergo an audit, the current employee count, and its licensing status in the UK.
See: Mastercard and Binance End Crypto Card Partnership
This evasiveness was particularly evident when Teng was asked to specify an auditor for Binance, to which he responded that the company, being private, was not obligated to disclose such information. The interview raised questions about Binance's commitment to transparency, especially given its status as the world's largest crypto exchange. Teng's reluctance to provide straightforward answers to fundamental questions about the company's operations and governance has added a layer of complexity to the narrative of Binance's new chapter under his leadership.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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How Permissioned DeFi Will Transform Global Payments
DeFi Payments | Nov 27, 2023
Image from Fireblocks and BCG Analytics
How Permissioned DeFi is revolutionizing cross-border payments with efficient, cost effective, secure and regulatory compliant transactions
The challenges of both traditional and permissionless DeFi for payments: Traditional cross-border payment systems are often slow, expensive, and lack transparency. Permissionless DeFi, while offering advantages such as near-instant transfers and better traceability, falls short in terms of anti-money laundering (AML) and Know Your Customer (KYC) functions, making it vulnerable to fraud and erroneous payments. These shortcomings have hindered its widespread adoption by financial institutions.
See: JPMorgan’s New Programmable Payments in Blockchain
Best of Both Worlds with Permissioned DeFi
Permissioned DeFi solves these concerns by integrating the best of both worlds: the efficiency of DeFi and the necessary compliance controls. This model involves several key steps and 8 key participants, ensuring a secure, compliant, and efficient process for cross-border transactions. Here's the step-by-step process below:
Step 1. KYC Process and Whitelisting: Institutions undergo a platform-level KYC process conducted by whitelisters, who approve users and add their digital wallets to the allowed list. Institutions can act as whitelisters or appoint third parties for this role.
Step 2. Initiating the Transaction: Once KYC-approved, a sender (individual, business, or institution) can initiate a cross-border fiat money transfer.
Step 3. On-Ramp Instruction to OOSP: The sender’s fiat balance is debited by an On- and Off-Ramp Service Provider (OOSP), and the sender’s digital wallet is credited with a token of equivalent value.
Step 4. Token Types: The model can use various tokens, like bank-issued stablecoins or central bank digital currencies (CBDCs), representing the transaction’s main payment format.
See: Insights Into Canada’s Evolving Payments Landscape
Step 5. Wrapping the Token: The token received in the digital wallet is wrapped by a service provider for interoperability across blockchains. The wrapping process involves locking the initial token in a smart contract and minting an equivalent amount of the wrapped token.
Step 6. Smart Contract and AMM: A smart contract deployed on the permissioned DeFi protocol handles the transfer of the wrapped token. An Automated Market Maker (AMM) provides a liquidity pool to facilitate trades and ensure near-instant settlement.
Step 7. Unwrapping and Off-Ramping: Receivers can unwrap the received token on another blockchain network.If fiat currency is preferred, an off-ramp step converts the token back to fiat, crediting it to the receiver’s bank account.
Cost Advantage
The use of permissioned decentralized finance (DeFi) with cross-border payments is estimated to be 80% cheaper than a traditional global payment transaction.
Let's compare the two payment methods by cost category in the table below which clearly illustrates the cost-effectiveness of permissioned DeFi in cross-border payments, highlighting the potential for significant savings for both payment service providers and end customers.
| Cost Category | Traditional Payments | Permissioned DeFi-Based Payments |
|---|---|---|
| Operational & IT Costs | $6.40 (80% of total) | $0.05 to $0.09 |
| Compliance Costs | $1.20 to $1.60 (15%-20% of total) | Assumed same as traditional: $1.20 to $1.60 |
| Total Cost per Transaction | $8.00 | $1.25 to $1.69 |
- There's a significant reduction in operational and IT costs in the permissioned DeFi model, dropping from $6.40 to a mere $0.05 to $0.09 per transaction.
- These costs are assumed to remain the same in both models, ranging from $1.20 to $1.60 per transaction. This assumption is based on the premise that the regulatory and compliance requirements are similar across both platforms.
- The overall cost per transaction in traditional payments is $8.00, whereas in the permissioned DeFi-based model, it ranges from $1.25 to $1.69. This represents a substantial cost reduction of approximately 80% in the permissioned DeFi model compared to traditional payment methods.
See: Bank-Issued Deposit Tokens Emerge and JP Morgan Sees Them Going DeFi
Conclusion
Permissioned DeFi is poised to redefine the landscape of cross-border payments with an efficient, cost-effective and secure solution that is compliant with regulatory standards. By addressing the limitations of both traditional payment systems and permissionless DeFi, this innovative model opens up new possibilities for global financial transactions, making them more accessible, transparent, and efficient.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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