Blurring the line between crypto and TradFi could redefine global finance

Despite the current struggle in the global economy, the gap between traditional finance (TradFi) and crypto seems to be closing with each passing day. 

For example, earlier this month, Vienna-based fintech unicorn Bitpanda announced that it was adding commodities to its list of investment options, thus allowing investors to rake in profits from short-term price fluctuations related to traditional instruments such as oil, natural gas and wheat.

In a recent interview with Cointelegraph, the company’s CEO, Eric Demuth, noted that the bear market had had no major impact on investor demand. He claims that more people are now looking for solutions that can bring the world of TradFi and decentralized finance (DeFi) together.

Not only that, there are lessons to be learned about what works out best for consumers operating within both realms. For example, while TradFi platforms can improve their accessibility and transparency mechanisms, DeFi ecosystems can learn a lot about risk mitigation from traditional finance entities.

Furthermore, with statistical data showing that more than 300 million individuals now own some cryptocurrency, more and more players from the two worlds are beginning to arrive at a middle ground. For example, many major institutions worldwide have been adopting crypto at breakneck speeds, with a recent research study showing that 76% of all major financial institutions will most likely be making use of digital assets within the next 36 months.

Is the confluence of TradFi and crypto imminent?

According to Victor Tran, co-founder and CEO of Kyber Network — a liquidity hub powering the Ethereum-based decentralized exchange (DEX) KyberSwap — it is only logical that traditional finance players are turning toward crypto since they want to increase their market share within an exponentially growing industry — one that has been witnessing more and more peer-to-peer (P2P) and commercial transactions by the day. 

By the same token, he highlighted that DeFi, too, is experimenting with more use cases, those that can maximize market participation as well as help boost transaction volumes, adding:

“It’s all about giving users benefits. We believe that TradFi and DeFi can co-exist synergistically and provide users unparalleled access, control and choice. Greater institutional participation, security measures and use cases will create choice, excitement and confidence for users. Sustainable overall liquidity in the market with institutional participation will also help with the challenges of volatile liquidity during downturns.”

Furthermore, Tran believes that privacy-focused noncustodial solutions will become mainstream soon, with multichain, secure DEXs such as KyberSwap laying the bedrock for such a transparency-oriented economy. “Addressing users’ security wants, and pain points are always first priority,” he concluded.

Jazear Brooks, CEO and founder of omni-chain DEX SifChain, shared a somewhat similar opinion, telling Cointelegraph that crypto and TradFi markets have been circling each other for the past few years, with many individuals from the latter having already joined the digital currency bandwagon after realizing that the best crypto projects can massively out-earn almost all of their conventional finance counterparts. He added:

“The chaos of crypto markets due to the collective inexperience of the industry reflects a world of pitfalls that have already been mastered by TradFi. TradFi is the elder statesman in the room representing timeless virtues of profitable investing in an unpredictable world.”

Brooks closed out by saying that the protective mechanisms of corporate governance can be combined with the populist, fast-paced, communal benefits of decentralized autonomous organizations (DAOs) to create a holistic finance system, one that is fair, transparent and inclusive in nature. “We’ll see market efficiencies increased as trad-fi systems are reimagined to import crypto values, and those…