It seems that the U.S. Securities and Exchange Commission (SEC) is making good on its promise of exploring how to regulate Decentralized Finance (DeFi).
In August, SEC Chairman Gary Gensler told a Wall Street Journal reporter that DeFi was not immune to oversight and that his agency would be exploring regulatory possibilities. That seems to be coming true faster than expected.
A bit later, Forbes reported that blockchain analytics firm AnChain.AI – a California-based artificial intelligence blockchain startup – is collaborating with the SEC to provide the agency with the technology and means to track, trace, and analyze DeFi smart contracts.
This is most likely no surprise to anyone within the crypto-space.
During an exclusive interview with DailyCoin.com, Oscar Yeung, co-founder of Convergence, said that as DeFi evolves, it could benefit from regulatory oversight. Convergence is a decentralized interchangeable asset protocol seeking to converge assets from around the real world onto parallel blockchains.
According to him, this is definitely an exciting time in DeFi, and there needs to be regulation to look after the market for users to be protected from being blindsided in the short-term.
“What we are doing at Convergence is something that is very long term. In the current crypto market, most of the coins or tokens follow Bitcoin’s movements - if Bitcoin goes up or down, virtually all other cryptocurrencies follow suit. It’s better for markets and investors if things are very diversified. We can broaden the crypto market and introduce new real-world asset classes as digital portions that represent different parts of the world and industries,”
In his words, Convergence can bring those real-world assets on-chain and bring more diversity to the evolving DeFi sector.
Yeung adds that they have a novel approach to tokenize large physical assets into smaller sub-sections. Convergence then offers those fractional portions of assets to investors who wouldn’t have access to such ownership opportunities.
“Our decentralized exchange - called ConvX - focuses on fractionalization of assets. So iIf there’s a certain private investment that requires a certain threshold for investors to participate, we can break that investment down into smaller pieces. That enables anyone with access to our ConvX exchange to buy a small bit of it,”
Once there’s a public liquidity event or initial public offering for that private investment, the resulting profits get distributed proportionally to the small ConvX fractions as well. Most retail investors are cut out from these opportunities, and Convergence offers them a way to participate via blockchain.
Yeung believes this type of fractional asset investment is the future evolution of DeFi. He further notes that non-fungible tokens (NFTs) will play a big role in shaping that future as well, and Convergence is preparing for it now.
“NFTs have huge potential as the space continues to grow. We actually have interesting projects coming out in the next few months where great artwork has been bought by an individual investor. The artwork will be fractionalized and put on Convergence,”
After a certain time period or certain price target is reached, that artwork will be sold and the profits from those NFT sales will be distributed back to Convergence users according to their token holdings.
Yeung added that the same concept can be applied to many different investment opportunities – and that is very exciting.
On The Flipside
- The vision is novel, but we’ll have to see what the SEC decides as harsh regulatory decisions could stifle similar types of innovation.
- It’s not clear if investors will accept the opportunity costs while they wait for regulatory approval of each and every project.
Watch the full interview here: