Tokenization of traditional finance will occur, but KYC and AML will impact its speed.

Joseph Chalom, head of strategic ecosystem partnerships at BlackRock, the asset management giant, stated at the Coinbase Crypto Summit, co-hosted by Coinbase and the Financial Times, that tokenization of stocks, bonds, and other traditional assets will occur, but at a slower pace than people expect.

Explaining RWA: Real-World Assets (RWA) - Bridging the Friendship between Traditional Finance and DeFi

DeFi and TradFi to Merge but Progress is Slow

According to DLNews, last Thursday's Coinbase Crypto Summit, co-hosted by Coinbase and FT, brought together professionals from the cryptocurrency and finance sectors. The conference took place at a critical time for cryptocurrency development. Despite the U.S. Securities and Exchange Commission's tough crackdown on the crypto industry, Wall Street is still making various plans in the field. BlackRock is looking to launch a Bitcoin spot ETF; Deutsche Bank is registering custody business with German regulators; and Citadel, Fidelity, and J.P. Morgan-backed exchange EDX has officially launched.

However, Joseph Chalom, Head of Strategic Ecosystem Partnerships at BlackRock, took a more cautious stance. He emphasized that true widespread institutional adoption will not occur until DeFi fully embraces and implements Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.

KYC and AML are Major Barriers to Institutional Adoption of Blockchain Technology

Chalom stated that many believe DeFi's innovative technology can match buyers and sellers, but this is just an illusion. We need to clearly understand who the participants are.

I believe that for large regulated institutions, no matter how much liquidity is available, it is difficult for them to participate if they cannot overcome KYC and AML. We only know that if we do not know who we are trading with, we will be in trouble.

Chalom mentioned the recent announcement by Uniswap, the largest decentralized exchange in the crypto world, about its v4 version, which will effectively allow developers to build their own exchanges on Uniswap.

Chalom said that Uniswap's v4 version almost allows a group of people to create a permissioned pool, a permissioned contract together. This is progress. However, the implementation of KYC and AML is off-putting to many developers dedicated to blockchain technology, as the creation of Bitcoin was intended to enable transactions without banks and other intermediaries. The permissionless nature of cryptocurrencies, where anyone, anywhere can use them, is seen as a characteristic of true believers in the technology.

The Staying Power of Cryptocurrency Technology

However, it is generally agreed that blockchain technology can reduce costs in the middle and provide better returns for customers in the long run. Attendees also agreed on the staying power of cryptocurrency technology.

Note: Staying power generally translates to endurance or persistence, but in financial markets, it also refers to "the ability of investors to stay in the market and not sell positions when the investment value declines."

Chalom predicts that it will eventually have a significant impact on the financial sector.

Fadi Massih, Senior Analyst at Moody's Investor Service, also stated that cryptocurrency technology is no longer just a curious topic but a significant area involving real money.