Venture Arm of Thailand's Oldest Bank Says DeFi Will Disrupt Traditional Finance

SCB 10X, Siam Commercial Bank’s venture capital arm, said it is preparing for the potential day decentralized finance (DeFi) upends traditional banking.

Speaking with CoinDesk via email on Saturday, Mukaya Tai Panich, chief venture and investment officer of SCB, said DeFi possesses everything traditional finance has today.

"When we looked at DeFi, we thought that it is possible that one day banks and other financial institutions will be completely disintermediated," said Panich.

That includes credit/lending, asset management, insurance, trading, derivatives and prime brokerage, Panich noted.

In economics, disintermediation refers to the removal of intermediaries from a supply chain, also known as cutting out the middleman, in a given scenario.

DeFi has been touted as possessing the ability to usurp financial middlemen through its use of smart contracts to execute code that govern the rules between two counterparties once specific measures, such as time, have been met.

One way the bank was looking to prepare itself, said Panich, was by investing in DeFi "very actively" in order to learn. The bank is also looking to find suitable partners in the sector as well as integrating DeFi into traditional finance.

"We would like to partner with DeFi protocols to work together to solve the issues in traditional finance to reduce costs of operation, have real-time settlements, eliminate intermediaries as well as have a high level of transparency," said Panich.

To that end, the chief investment officer said she believed in a future where traditional financial companies work hand in hand with decentralized ones pointing to traditional's "huge customer base."

In that scenario, traditional financial companies would pick up the slack on customer-facing activities such as acquiring customers, providing them with a "simple, easy to understand, and integrated interface." DeFi, in turn, would power the back end to reduce transaction and settlement times, lower costs and increase transparency.

"For this to happen, I think traditional financial companies like us should actively explore, invest and adopt DeFi. And at the same time, DeFi companies should look to work with traditional financial companies to leverage their strengths," said Panich.

"This is why we have invited industry leaders to educate the South East Asia region about new innovations in DeFi and look forward to hearing from them at our second annual REDeFiNE TOMORROW Summit on July 22-23."

When asked what trends SCB was seeing in the sector, Panich told CoinDesk she was looking to the promise of continuing development in the infrastructure and cross-chain interoperability among existing protocols.

"Currently, different blockchains are solving specific problems within their own ecosystem," said Panich. "There are a lot of inefficiencies as assets are being used mostly within the ecosystem and cannot be transferred to be used in another blockchain that easily."

DeFi has often faced difficulties in getting different protocols to speak to one another as a result of different programming languages and varying consensus rules used. Solving those issues would allow for a more efficient use of assets and information across various blockchains, Panich said.

In February, the venture arm launched a $50 million fund to invest in blockchain, digital assets and DeFi startups with a focus on global growth-stage companies that it thinks will help shape the next generation of financial services.

"Investing in the picks and shovels is always a good idea," said Panich. "DeFi applications have been innovating really fast in the last year, and now the infrastructure needs to be upgraded in order to catch up with all these innovations."