Decentralised Finance (DeFi) is a new class of innovative financial products that use blockchain tech and smart contracts to disintermediate traditional banking. The acceleration of digital technology has proven that any existing banking product can be disrupted by DeFi applications.
Decentralised Finance (DeFi) is a fast growing blockchain-based financial system that operates without any intermediaries, such as banks, exchanges or financial institutions, and instead is driven by the utilisation of smart contracts.
DeFi challenges the centralised traditional financial system by removing regulators and gatekeepers and empowering ordinary people via peer-to-peer exchanges. DeFi has been growing at a fast pace in recent months with a growing variety of use cases.
This is one of the initial and most basic forms of DeFi application for the purpose of providing loans at cheaper lending rates and lower cost to consumers.
With the effective goal of reducing credit risk and financing costs, supply chain financing is more transparent across all the financing tiers.
The potential for more precise and more targeted risk assessment, has helped to reduce insurance cost - also used for more accurate prediction of risk and outcomes.
These are ways to “lend” existing tokens and cryptocurrencies to generate more returns which have the potential to “automate” and reduce risk.
Aim to provide a Decentralized Exchange (DEX) for more efficient 24/7 trading of various financial assets as well as to bridge the gap between private and public markets.
This is a growing field which can be used to predict event risks more accurately. Such as generating the potential permutations and possible outcomes with more certainty for M&A deals or election outcomes etc.
An increasing number of DeFi applications have started to issue their own tokens as “currencies” for use in their specific ecosystem. This results in a new coins growing within the cryptocurrency space, with rising market capitalization of about USD 150 bn.
A type of DeFi application as a decentralized alternative to traditional payment rails. Stablecoins have found increasing use to facilitate direct crypto-to-crypto payment as well as crypto-to-fiat payment.
Fund raising by using smart contracts to fractionalize an existing high value asset into smaller tokens for distribution. Through the process the high value asset is monetized as liquidity is generated through the token distribution. The high value asset can range from traditional securities, to private equity, to real estate and even esoteric precious collectables like art pieces, paintings and super cars.
NFTs are an increasingly popular form of unique tokens based off the Ethereum smart contract. A type of DeFi application for decentralized and permission-less creative fund raising by digitizing ownership. Particularly popular in amongst arts and paintings.
At UOB, we are making the best use of blockchain-based technology innovation to make the most difference to our customers.
Asset tokenisation is the process of creating digital tokens of an item on a distributed ledger or blockchain. We see the asset tokenisation space as one such area with positive and constructive development for the industry particularly as a new channel for capital markets fund-raising for corporates, including our clients.
In June and October 2021, UOB has successfully issued our own digital bond on Marketnode and facilitated Sembcorp’s first digital green bond on ADDX. Find out more here.
We believe that CBDCs could offer governments the ability to deploy fiscal payments efficiently to target segments of the population and drive financial inclusion in the region. CBDCs could also offer businesses an easier and safer funds transfer process, which will further encourage regional trade and financing across ASEAN.
Given the potential of CBDCs being a game changer for payment and trade settlement in the region, UOB is engaged in selective CBDCs projects, such as Singapore’s project Ubin, and is also consulting with central banks in the region as we see how China is charging ahead with local public trials and test cases of the e-CNY.
We want to be at the forefront and are working to ensure our readiness to help our clients across the region with the use of CBDCs when they are rolled out in the coming years.
The use of blockchain technologies can resolve process friction and opacity through the entire trade value chain. As such, we see the immense potential blockchain technologies have to transform supply chains with greater agility and resiliency to unlock the US$56 Trillion of working capital trapped today.
Enhance data visibility, auditability and transparency
Reduce manual reconciliations and exceptions management
Promote collaboration between banks and corporates
Self-managed identities, underpinned by blockchain, enable greater privacy, control, and improved hyper personalized service. Individuals will reside at the heart of their own ecosystems with total ownership of their personal data.
Reduced repetition and compliance overhead, with improved data accuracy
New offerings with increased customer retention and improved ability to up/cross-sell
Personalization, utility and integrated user experiences
