Traditional financial institutions are coming into the crypto space- there is no denying that trend. Over the past year, trad-fi companies have either indicated their interest entrance into the space, or even announced successful trials for blockchain-based products.
Increasingly, Web3 native companies have had to share this market with traditional financial institutions like banks. At this year’s Token2049 conference in Singapore, an entire panel was dedicated to executives from traditional finance- and their take on the Web3 industry and Web3 financial products.
Rene Michau, Global Head of Digital Assets at Standard Chartered, Evy Theunis, Head of Digital Assets at DBS, and Gerald Goh, Co-founder and CEO of Sygnum in Singapore were all present to answer questions on what they were doing in the crypto space.
The need for banking remains even in Web3
Fundamentally, businesses need a place to store their money, regardless of whether they are Web2 or Web3 companies.
However, what banking means for Web3 companies is not necessarily the same as what banking means for Web2 companies.
For one, centralised entities like banks have had to adapt to new security and corporate governance protocols when it comes to managing Web3 wallets and transactions.
“In the Web2 space, the way that banking transactions often work is that we send orders using secured and trusted messaging services like SWIFT. For banks like Standard Chartered, security will often mean setting an admin password and keeping track of who knows this password.
But there is no such admin password when it comes to Web3. Instead, it means managing public and private key pairs to ensure that malicious actors do not get access to our wallets or our clients’ funds.”
-Rene Michau, Global Head of Digital Assets at Standard Chartered.
Centralisation isn’t always bad
While some purists might object to the idea of centralised entities and institutions within the Web3 space, the panellists also pointed out that there is a certain need for centralisation and regulation within the crypto space.
In particular, while many people hope that the industry can put the FTX debacle behind them, the panellists noted that the scandal itself revealed a need for greater regulation because of the massive risks that a lack of regulation presents.
Gerald Goh, co-founder and CEO of Sygnum in Singapore, pointed out that “while many in the space seem to have this idea or consensus that centralisation is bad and decentralisation is good, its rarely as simple as that.”
In fact, Goh reveals that while Sygnum primarily functions to provide banking services to crypto companies, there is also a large group of clients who insist on using regulated financial institutions and known intermediaries, simply because using unregulated institutions would raise significant questions.
The point was echoed by Evy Theunis, Head of Digital Assets at DBS Bank.
“FTX showed us that counterparty risk is an issue, and many of our customers saw the need to go through a trusted and centralised party to make transactions. It's about risk management and safety as much as it's about using technology to improve what we can do for our clients.
And just because we are a centralised entity does not mean that we are resistant to change. We consistently keep up with industry trends and use new technologies where we see fit, like when we issued a Bill of Lading as an NFT.”
What’s in store for trad-fi in the next few years?
The panellists also discussed challenges and upcoming projects within the Web3 space, and the role that traditional financial institutions can play in shaping that future.
According to the panellists, regulation and the macroeconomic climate are proving to be great challenges to the industry, and these are topics to monitor closely moving forward.
Michau and Goh both agreed that the APAC region holds huge potential for the Web3 industry, and credited the forward-looking policies of governments in the region for it.
That being said, both these panellists admitted that more could be done. Rene cautioned that while regulators have the right mindset now, it cannot be taken for granted. He sees regulation as having the potential to foster the industry, but also to destroy it if the wrong regulations are put in place.
Goh also noted that while traditional financial institutions have been getting on board and providing banking services to crypto companies, they can still do better. “After all”, Gerald said, “Sygnum would not be doing as well as it did if traditional financial institutions like banks were doing a good enough job of it.”
Clement
Bitcoinist
Coinlive 
Ledgerinsights