The aim is to create an environment where more TradFi institutions can get involved in DeFi minus the risks facing retail investors.
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A consortium of companies is receiving support from a research hub backed by Italy’s central bank in a bid to develop an ecosystem for traditional financial institutions to wade deeper into DeFi.
Cetif Advisory, a research consultancy supporting banks, insurance companies, and other TradFi firms with digitization solutions, announced it was receiving developmental support from the Milano Hub, a research center with backing from the Bank of Italy, for what it calls the "Institutional DeFi for Security Token" ecosystem.
The project, a collaboration with other companies that includes Polygon Labs and digital asset platform Fireblocks, aims to create a "safe and open operating environment" for institutional players, said Imanuel Baharier, general manager of Cetif Advisory, in a statement.
Retail investors in DeFi are often operating in unregulated spaces that pose too many risks for traditional firms, and the uncertainties involved often don't justify the risk.
In this ecosystem, Baharier told Decrypt that Cetif's protocol would include traditional rails around know-your-customer and anti-money laundering that these firms are familiar with.
The goal, Baharier insists, is to open access to the platform by 2024, and allow real-world testing of the tokens it's developing on secondary markets.
"We strongly believe this is a key moment to position ourselves as a leading ecosystemic player in this emerging security token market," Baharier told Decrypt.
The Milano Hub began supporting the project on July 3, and it will go on for six months.
This support does not include financial support, but it will share consultants with expertise on financial regulation on top of helping organize events to support the project.
One central aspect of the project is the creation of a security token for use on the protocol. Some of the support for this will come from Italy’s largest financial institutions, including Banca Mediolanum and the private bank Intesa Sanpaolo.
Baharier said that these companies will be involved in introducing the tokens to primary markets, and eventually onto the secondary market.
The value of the tokens involved will also be backed by these firms, he added.
