Saturday, June 3, 2023

Siam Commercial Bank Enters The DeFi Space Via Compound

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The Siam Commercial Bank enters the DEFI space via Compound and its 4% yield service via the Fireblocks custody platform so let’s read more today in our latest cryptocurrency news.

The Siam Commercial Bank enters the DEFI space as the oldest bank in Thailand, with the help of Compound Treasury as the lending platform’s institution-focused service. The digital venture arm of the bank dubbed SCB 10x was launched at the start of 2020 and will deposit funds into the Compound Treasury which will leverage custody firm Fireblocks. The service converts US dollars into USDC on Compound and will allow institutions to earn fixed annual yields of 4% so the size of the allocation into Compound Treasury wasn’t disclosed.

The S&P Global rating of the platform revealed that the platform only had 20 customers and $180 million was invested at the end of April. The larger institutions such as Banks eyed the DEFI space with services such as Compound and Aave offering serviceable entry points. SCB 10x was an avid VC investor in crypto and is involved in building infrastrcuture in the space and the bank’s digital division ironed out how to take part in DEFI since July 2021 as per Mukaya Tai Panich, the chief investment officer at SCB 10x. Panich said in an interview:

“Not only are we an investor and a builder, we also wanted to adopt these types of disruptive technology to use, especially to use inside a bank. We think Compound has created a regulated instrument that’s very easy to understand: U.S. dollar in, U.S. dollar out with a fixed 4% interest rate, so institutions don’t have to worry about how to interact with crypto.”

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Panich got to know the Compound CEO Robert Leshner and was able to get a dialogue to try and meet the bank’s requirements:

“We talked to Compound about the ‘principal back’ guarantee, that it was a request from our treasury team. At the beginning, Compound didn’t offer that. But, lo and behold, after many months they offered a ‘principal back’ guarantee.”

The complaince layer was provided by the custody company Fireblocks which facilitates the whitelisted Aave Arc DeFi service for institutions and was working with Compound Treasury since last year. Shaulov added:

“We are seeing more high-end institutional clients tapping into the DeFi. We believe things like Compound Treasury and Aave Arc are definitely stepping stones to make them comfortable with DeFi, and SCB has always been on the forefront of innovation so we were happy to see them moving forward.”

The Compound Treasury isn’t a permissioned lending pool like Aave Arc but it is an operational layer that on-ramps USDC into a permissionless Compound protocol that is monitored by analytics software by making sure nothing malicious happens in the lending pools. Panic added:

“It’s very unfortunate that this whole thing happened. But the education of regulators, board members and the people at the top level of management got accelerated by several years. So, I guess that’s a silver lining.”

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