There are many who support the concept of decentralised Finance (DeFi), which essentially means availing loans or other financial support without any third party interference. In conversation with FE DigitalCurrency, Bhairav Kothari, founder, SuperCFO, a chief financial officer services provider company, talks about the DeFi as an alternate option to traditional financial services in India. (Edited excerpts)
How will DeFi be implemented and what is the chance of success?
DeFi solutions are based on several blockchains, and these ecosystems consist of users connecting with one another through peer-to-peer (P2P) processes. The DeFi community needs to be implemented through a stronger know your customers (KYC) norms. In the ability to track end beneficiaries, and ensure appropriate details are made available for tax authorities to validate due compliances with tax laws as well as operate under the Foreign Exchange compliance laws. To solve this, unified payments interface (UPI) is a wonderful solution, that India has implemented. Although, it’s going to be tough to implement DeFi in its current form in India due to the security issues.
Banks and enterprises have entered the metaverse, what are the financial security concerns?
Users’ network credentials may be compromised by cyber criminals and hackers. For bankers utilising augmented reality (AR) and virtual reality (VR) banking apps, hacking is one of their top worries. Theft of network credentials might potentially jeopardise users’ financial and personal data kept in their metaverse user accounts. Blockchain helps a lot as every transaction is available on a public chain. For now, a lot of developments have happened in the metaverse including provision of interesting brand experience, showcasing new products, and offerings.
What are the important benefits of DeFi? If we speak about the DeFi token, will government ever implement any such?
DeFi solutions are based on several blockchains, and these ecosystems consist of users connecting with one another through peer-to-peer (P2P) processes. DeFi eliminates intermediaries which was mandatory before due to the need to get transactions approved through third parties.
However, there is a high probability that the Indian government could come up with its own token system. Centre might begin doing it through certain institutions, ensuring that select transactions are opened up for those who qualify certain criteria (to insulate the common man who may not be an informed investor or does not have the ability to meet various compliance needs).
Under traditional finance systems, many people with lower incomes may not qualify to take out loans, invest or even open accounts in their name. In 2021, many DeFi platforms were developed that support NFTs being used as collateral to get loans.