Russia’s Sberbank Moves Into DeFi, Following Slow-Moving Trend Of Traditional Banks

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Russia’s largest state bank, Sberbank, is now exploring the world of decentralized finance, known in the cryptocurrency industry as DeFi. Sberbank is one of the few traditional banks around the world trying to take advantage of the DeFi market some have guessed To become a $13 billion market. Sberbank is building its own Ethereum devices on the Ethereum blockchain.

“This will give our customers access to new types of financial products and services,” a Sberbank spokesperson told me.

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Sberbank begins its DeFi exploration in July 2022, about six months after Russia’s war with Ukraine. The bank created a proprietary platform for registered securities firms (and accredited investors) to issue their own tokens or invest in them and other cryptocurrencies. A Sberbank spokesperson said that in the “near future,” the (now approved) Russian bank will allow retail customers to access and trade Ethereum-based digital assets. The role of the bank will be primarily that of information and advice.

“This scenario will be invisible to the customer. They will not know which DeFi protocol or blockchain their bank is using. All they know is that they have access to their traditional bank in DeFi products,” says Jeremy Epstein, CMO at Radix. There is now an opportunity to earn higher returns on your deposits by investing through
, a smart contract platform for DeFi applications. “TradeFi will be responsible for risk management, like they do now with loans, for example, and will have to hedge against smart contract risks, which they can do by purchasing policies from crypto-native insurance protocols like Nexus Mutual.”

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Certainly, a new financial industry is being born.

from russia to brazil

In another BRIC market, Itau, a major Brazilian bank, partnered with the Central Bank of Brazil’s “Lift Lab” to experiment with DeFi.

“It is hybrid finance, where the traditional banking market has been merged with the digital one – namely through blockchain technology,” says Guto Antunes, head of Itau Digital Assets in São Paulo. “We see this as preparing the bank for a new generation of customers who have formed different habits and are exposed to tokenization of financial services.”

Like Sberbank in Russia, Itau is also using Ethereum.

There are other DeFi blockchains competing with Ethereum, such as Solana
Fifth note of musical scale
, Some focus on transaction volume; Others offer low “gas fees” (transaction fees paid in native tokens for the blockchain in use, such as ETH for Ethereum). Other competitors offer more user-friendly experiences for developers to create smart contracts and new ways to interact between public and private blockchains. Itau announced the first trial of a cryptocurrency custodian service by a bank in November 2022.

The consensus is that TradFi will not kill DeFi. For now, the relationship between BRIC banks and the global Ethereum community can best be described as a friendly courtship.

What It Looks Like When TradeFi Meets DeFi

“There’s a lot of hand-holding,” Epstein told me in an interview. “In effect, TradFi will serve as a front-end gateway to DeFi, giving customers the option of offering custodial and advisory services. The first example of this relationship is fairly rudimentary, but you can see Fidelity offering custody of bitcoin as a first step in the TradeFi/DeFi relationship.

With the “hybrid finance” model that Sberbank and Itau are talking about, a traditional retail bank could offer crypto staking services as a feature to regular bank accounts. Banks will manage all the various accounts as a service for their customers. A whole new finance sub-sector is being created around this TradFi/DeFi merger.

Banks with asset management operations, such as Sberbank or a Spanish DeFi-friendly bank Santander, can expand its product range. Some investments may also be insured in the same way that savings are insured by the FDIC, up to $250,000.

The motivation for banks exploring DeFi tools for TradFi customers is the hope of providing more product options at a lower cost.

“Banks and other financial institutions have to compete on customer service because people can go directly to DeFi exchanges and do it themselves,” says Epstein. “For those who choose to go through Bank of America
Or Schwab, the backend, as it is today, would be invisible.

Global DeFi Boom

More than 40% of banks worldwide are using some form of blockchain technology today. Low costs, transaction speed and DeFi are the reasons, says Roman Troskin, director of strategic marketing at BDC Consulting in Estonia.

“You may not even be aware that your daily purchases, transfers, and other transactions at your bank are being made and stored on the blockchain,” Troskin says. “Twenty years ago, no one could have imagined buying stocks on your phone. But now it’s a reality and a bit out of date. Forget cryptocurrencies. The main thing here is blockchain and the technological advances it brings to traditional finance. “

On the other hand, especially with regard to cryptocurrencies, a reports Grand View Research, a San Francisco-based market research firm, estimates that the global DeFi market will expand at a compound annual growth rate of 46% from 2023 to 2030. The future bank may not be a binary world of blockchain or decentralized cryptocurrencies, but a coexistence of the two.

“Our mission is to provide a new level of trust in the (DeFi) market,” says Itau Bank’s Antunes. “We will be ready to offer the best services in digital assets … as soon as regulation (in Brazil) allows it.”

TradFi and DeFi can live happily ever after. However, regulatory bodies will either allow this coexistence to work or ruin the love affair. For now, some banks are hoping to get the best of both worlds by tapping into crypto trends.

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