To help businesses smoothly integrate DeFi into their existing finance processes, we sought insights from founders and Chief Financial Officers. From starting with DeFi pilot projects to ensuring regulatory compliance in DeFi, here are seven invaluable tips shared by these industry leaders.
- Start with DeFi Pilot Projects
- Treat DeFi as a Backup Plan
- Prioritize Education and Collaboration
- Create a DeFi “Sandbox”
- Begin with Non-Critical Processes
- Partner with Traditional Financial Institutions
- Ensure Regulatory Compliance in DeFi
Start with DeFi Pilot Projects
One essential tip is to start with “pilot projects.” Instead of overhauling the entire financial system, businesses should first identify a specific process or department where DeFi can add value. This allows for testing, learning, and refining the integration in a controlled environment.
For instance, a company I advised began by integrating DeFi into its international payments system. By leveraging DeFi platforms, they reduced transaction costs and times significantly. After observing the success and ironing out challenges in this area, they expanded DeFi adoption to other financial processes.
In essence, taking a gradual, pilot-project approach ensures businesses can seamlessly integrate DeFi while managing risks effectively.
Anup Kayastha
Founder, AutoLoanCalculator.net
Treat DeFi as a Backup Plan
Most businesses spend money on “just in case” scenarios. You may have a fire extinguisher, offline backup, smoke alarms, or insurance against break-ins, theft, or meteor strikes. You pay for these things and hope you never need them, but they are there just in case you do. The world has existed for centuries without Decentralized Finance (DeFi), but we have also had bank runs, bank bailouts, bail-ins, and the collapse of financial firms that were hundreds of years old.
Cryptocurrencies and DeFi were created in the aftermath of the 2008 Global Financial Crisis, in much the same way that the first insurance schemes were started after a series of unfortunate events. If you consider that DeFi is a backup for when centralized finance (CeFi) fails to operate as expected, it makes sense to have a modicum of DeFi exposure. The best time to sort out your backup plan is well before you need it.
Jeremy Britton
Chief Financial Officer, Boston Trading Co
Prioritize Education and Collaboration
Ensuring successful DeFi integration involves educating the team, with 82% of our staff completing specialized training modules. For instance, to incorporate DeFi lending into our financial operations, we conducted interactive workshops focusing on risk management and decentralized protocols, resulting in a 30% reduction in processing time.
Additionally, we fostered partnerships with established DeFi platforms, enabling a smoother transition and gaining access to expert guidance. This proactive approach enhanced our financial agility, generating a 25% increase in investment diversification within the first quarter, reinforcing our market resilience and adaptability.
Himanshu Sharma
CEO and Founder, Academy of Digital Marketing
Create a DeFi ‘Sandbox’
To seamlessly integrate DeFi into existing finance processes, create a DeFi “sandbox” within your organization. This allows a smooth transition without jeopardizing ongoing operations. A client of ours started by dedicating just 10% of their operations to DeFi. The approach reduced risk and provided valuable insights, enabling them to scale up to 50% within six months. DeFi integration can be a calculated phase-in rather than a disruptive leap.
Roy Lam
CEO and Co-Founder, GeniusHub Digital Marketing
Begin with Non-Critical Processes
Integrating DeFi into non-critical finance processes initially minimizes disruption and is a best practice for smooth integration. For example, a business could start by implementing DeFi solutions for internal expense management or reimbursement processes. This allows the team to understand the dynamics of DeFi, identify potential challenges, and refine the integration strategy without risking critical financial operations.
Once confidence is gained, DeFi integration can gradually expand to more critical processes, like automated lending or liquidity management. By following this gradual approach, businesses can ensure a smoother overall integration of DeFi into their existing finance processes.
Roy Lau
Co-Founder, 28 Mortgage
Partner with Traditional Financial Institutions
Partnering with traditional financial institutions can bridge the gap between DeFi and existing finance processes. This collaboration combines the stability and expertise of traditional finance with the innovation and efficiency of DeFi. Businesses can navigate regulatory challenges, access a wider customer base, and create interoperability between the two sectors.
For example, a traditional bank can partner with a DeFi platform to offer customers decentralized borrowing and lending options within their existing banking app. This integration provides customers with a seamless experience and unlocks the benefits of DeFi while leveraging the bank’s trust and regulatory compliance.
Ben Lau
Founder, Featured SEO Company
Ensure Regulatory Compliance in DeFi
Businesses should ensure regulatory compliance when integrating DeFi.
They should understand the legal requirements, collaborate with experts, and implement necessary measures. For example, a financial institution integrating DeFi lending must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations. They can partner with a DeFi compliance service that offers identity verification solutions, transaction monitoring, and AML screening.
This approach ensures legal compliance, mitigates risks, and builds trust with stakeholders.
Yoana Wong
Co-Founder, Secret Florists