Bank of Italy's Milano Hub partners with Cetif Advisory to explore DeFi for institutional investors
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(Kitco News) - The Bank of Italy is jumping into the world of decentralized finance (DeFi) as the Milano Hub innovation center, the central bank’s center for developing innovative ideas in finance, is supporting the development of a project launched by Cetif Advisory to research a security token ecosystem for institutional DeFi.
Cetif Advisory is the consultancy branch of the Cetif Research Centre at the Università Cattolica del Sacro Cuore in Milan. The firm is collaborating with Ethereum scaling network developer Polygon Labs and crypto custodian Fireblocks to launch the project and help financial institutions explore the world of DeFi and tokenized assets.
The Milano Hub began supporting the development of Cetif Advisory’s project on July 3, and the project will last for six months. The main goal of the platform is to help traditional financial institutions experiment with security tokens and execute transactions using DeFi rails in a safe and regulated manner.
Some of the other partners on the project include tech developer Reply, legal and tax consultant Linklaters and web3 studio DVRS. Multiple Italian banks – including Italy’s largest bank, Intesa Sanpaolo – asset management companies, and ten other financial institutions will participate in the implementation side of the trial.
“We believe it is vitally important to create the conditions for DeFi to become a safe and open operating environment for supervised entities as well,” Imanuel Baharier, general manager of Cetif Advisory, said in a statement.
DeFi is known for being an unregulated space with little oversight, which poses unacceptable risks to traditional firms that are bound by the laws of the jurisdiction in which they operate.
Baharier told Decrypt that Cetif's protocol will include traditional rails around know-your-customer (KYC) and anti-money laundering (AML) verifications to help participating firms and the platform as a whole remain in compliance with regulations.
Baharier said Cetif Advisory’s goal is to open access to the platform by 2024 to allow real-world testing of the tokens it is 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,” he said.
|Bank of Italy is readying its economy to integrate blockchain|
This new project aligns with efforts by central banks around the world to incorporate blockchain technology and central bank digital currencies (CBDCs) into existing payment systems. It also incorporates the growing movement of tokenization among traditional finance institutions which has seen bonds and equities transformed into digital assets represented on the blockchain.
“I believe the next generation for markets, the next generation for securities, will be tokenization of securities,” BlackRock CEO Larry Fink said at the New York Times’ 2022 Dealbook Summit. Security tokenization will enable instantaneous settlement of bonds and stocks, remove the middlemen, and dramatically reduce fees, he added.