CeDeFi for banks: making sense of a decentralized world

A combination of centralized and decentralized financial systems and components, driving constant and rapid innovation while ensuring regulatory compliance, will likely be the future of financial services. Today, banking entities operate naturally within a centralized structure. But we believe that even a centralized bank can decentralize some of its functions and successfully deliver elements of its business without losing overall control, thus creating a new construct – centralized/decentralized finance, or CeDeFi.

It’s certain that the topic of how and where to decentralize in the overwhelmingly centralized and regulated financial services world is a complex one. The best way to ensure all are on the same page is agreement on and understanding of a common lexicon, or taxonomy, describing the key component pieces at play in the decentralized finance (DeFi) space today. Then, discussion and decision making can move smartly forward about where to overlay decentralized solutions on one or multiple offerings within a bank’s centralized portfolio.

In this paper, along with Aite-Novarica Group, we explore the elements of a robust taxonomy for DeFi as well as a number of specific business opportunities where a decentralized approach can yield substantial positive results for banks and their customers, even inside a centralized enterprise. Key next steps for success in a CeDeFi world are outlined for both banking institutions and solution providers.