At the Barclays Crypto & Blockchain Summit, Chainlink co-founder Sergey Nazarov joined Barclays analyst Ramsey El-Assal virtually to identify the fundamental questions banks should ask as they prepare to offer users access to decentralized finance ( DeFi). From Nazarov’s perspective, the DeFi journey is already underway.
“This already started with custody,” he said. “Basically, when PayPal started offering the ability to get access to the cryptocurrency that they essentially hold in custody for people at the retail level, that, I think, was what really created the proverbial shot in the air.”
PayPal’s move to custodial crypto in October 2020 was followed by a rise in DeFi’s TVL, which hit a record high of $13.6 billion and kept climbing. As the industry-leading Oracle network that secures the vast majority of DeFi, Chainlink secured $75 billion worth of smart contracts by the end of 2021.
This, Nazarov explained, is because once users have access to cryptocurrency, they inevitably want to put their digital assets to work. in various DeFi protocols. So, he said, the first question banks need to ask themselves is: “Do you think your customers will still want custody of and access to cryptocurrency?”
He continued: “If the answer is yes, well, then there’s another very simple question: where do the users go from there?”
Nazarov’s answer is DeFi, which offers users up to 8% return on the US dollar along with superior transparency and autonomy.
“It will just come down to [banks] needing to cater to customer requirements and those requirements have already been solidified around the custody lawsuit,” he said.
In other words: if it’s cryptocurrency, then DeFi.
Nazarov believes that the biggest hurdle in the race to DeFi has already been cleared, explaining that the move to offer custody is “much, much bigger” than the conceptual move to offer custody and then offer access to DeFi.
“That’s a very, very small jump,” he said. “And I think that this is the small leap that is going to have a very big impact on what users and clients expect from their banking institutions and partners. And I think banks should be very prepared for that.”