In an interview with Cointelegraph, IBM’s director of financial services and digital assets, Nitin Gaur, shared how the technology company is helping financial institutions capitalize on the DeFi movement.

Gaur, the author of Blockchain for Business, says it is essential that banks understand and embrace the DeFi space. Otherwise, he says it could eventually damage their entire business model:

„I think financial institutions should understand it because it has the potential to eventually take over and reduce the business elements of existing business models.“ And that’s one of the reasons why a bank should do it.“

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DeFi presents a number of regulatory challenges to financial institutions and Bitcoin Billionaire believes it can help its clients navigate them. However, most financial institutions are still in the early stages of exploration when it comes to DeFi, and are caught in the crossroads between true decentralised finance and the simple digitisation of traditional securities. However, Gaur envisages an entry „of the big banks, starting with the investment banks“.

A rethink is needed
At the same time, it recognizes that for banks to succeed in this space, they would have to rethink their approach. It is not enough for them to create some DeFi products, real value will only be unlocked if they adopt the global nature of blockchain networks.

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He said IBM wants to help connect banks, „in the global marketplace dynamics that the DeFi space has to offer, not to mention product innovation, creating new products that compete and creating a kind of complementary products.

While it is unclear when we will see major banks enter the DeFi space, Gaur mentioned that Goldman Sachs‘ hiring of a new head of digital assets is a positive sign.