NEW YORK - Developing digital identity infrastructure such that counterparties know who they are trading with is critical to getting large institutions involved in decentralized finance (DeFi), said Joseph Chalom, head of strategic partnerships at BlackRock, at the State of Crypto Summit held by Coinbase and the Financial Times in New York on Thursday.
Identifying counterparties may be important for large regulated institutional players like BlackRock, the world's largest asset manager, but it might contradict the privacy ethos of crypto natives. However BlackRock has recently emerged as a potentially priority-setting player in the industry by applying this month to list a bitcoin exchange-traded fund (ETF). Given its size, its desires might have a greater shot at becoming industry rules than the often-anonymous folks who have long steered crypto.
"The first issue is, who am I trading with?...We go to jail, if we don't know who we're trading with," Chalom said of institutions such as BlackRock, adding that he is not optimistic that the digital identity issue will be solved in the short term.
Issues such as the automated market making in DeFi instead of central order limits books are just fig leaves, said Chalom. "We need clear understanding of who is in a pool," Chalom noted.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.