SmartCon focuses on interoperability: Decentralized Finance / TradFi giants share future integration vision and 3 major obstacles to overcome

At the SmartCon conference hosted by Chainlink, its co-founder Sergey Nazarov and industry representatives from HSBC, Aave, and SBI DM, etc., jointly discussed how Decentralized Finance and TradFi could be merged through interoperability to create more new financial products. (Background: SmartCon speech》Which Web3 areas will explode in 2025?) (Background: SmartCon2024》Chainlink founder Sergey Nazarov speech: TradFi efficiently enters Web3) At the SmartCon conference hosted by Chainlink on October 30-31, global blockchain and TradFi giants gathered at the Kerry Hotel in Hong Kong, making it a milestone first large-scale dialogue conference in the Web3 and TradFi industry. Our special correspondent also attended the event on 10/31 to bring readers selected sessions in real-time. This article will introduce the importance of "Bringing the World on-chain - Interoperability." Opening and guest introduction Sergey Nazarov: Hello everyone, it's great to see you all. We have many topics to discuss with outstanding speakers today, so let's get straight to the point. Let's do a quick introduction. Benjamin Chodroff: I work at HSBC and head the HSBC Lab. Our focus is on researching emerging technologies, especially the applications of digital assets and Web3, and exploring how to bring these concepts into traditional customer markets. Emilio Frangella: Hello, my name is Emilio, and I work at Aave Labs as the Vice President of Engineering, responsible for all matters related to Aave protocol development in the lab. Tom Menner: Hello, I'm Tom Mather, the CTO of SBI Digital Markets, headquartered in Singapore. SBI is not the State Bank of India, but a financial group in Japan. Our SBI team focuses on digital assets, aiming to provide digital asset distribution services for capital markets and institutional investors. Sergey Nazarov: Great, thank you. Tom and Ben are among the few who are truly driving the use of blockchain and smart contracts in the capital market and TradFi world. Emilio has played a very crucial role in building Aave and has a remarkable reputation, driving the lending market and becoming one of the key protocols leading the entire Decentralized Finance wave. So I believe the upcoming panel will be outstanding, bringing together representatives of wisdom from the Decentralized Finance and TradFi communities. Guest list: Sergey Nazarov, Co-founder of Chainlink Benjamin Chodroff, Head of HSBC Lab Emilio Frangella, Vice President of Engineering at Aave Labs Tom Menner, CTO of SBI Digital Markets Improving traditional banking with Web3 Sergey Nazarov: This brings me to my first question - how do you think Decentralized Finance and TradFi will become users of each other in the coming years? How do you see this development? Benjamin: I have some personal insights, but from the perspective of traditional banks, I'll start from the bank's perspective. We are standing on the shoulders of giants, and many smart contracts and other functions actually originate from Web3 and Decentralized Finance, and these technologies can indeed help us provide new products to offer customers a better experience. I think this is the opportunity, where we can apply these concepts from the public domain of the industry to regulated institutions. These concepts are broad, such as decentralized identity, and the ability to add new programmability to existing physical assets, which is a huge opportunity. Personally, I use both traditional banks and Cryptocurrency and BTC. I think many of us are already in these two worlds. I should say I'm fully immersed in the 'CryptoPunk' world, and this is the direction I see - applying ideas from the public domain of the industry to regulated institutions. Sergey Nazarov: Do you think TradFi users may eventually become users of Decentralized Finance at some point? Benjamin: Certainly. We have already used smart contract functions on many tokenized physical assets. HSBC announced a tokenization project for bonds in Hong Kong, and we are also working on tokenizing gold. At the same time, we also announced that we will soon provide institutional custody services. We will increasingly need to promote these services in different regions. These are all fundamental elements from the Decentralized Finance community, and theoretically, through appropriate regulations, we can even make them operate on the underlying ledger, where a public permissionless ledger is a potential option. This is the vision of the future, it won't be achieved overnight, but major institutions are already here, and we are also working hard to promote it. Decentralized Finance integrating into the financial system becomes an invisible layer Sergey Nazarov: Emilio, how do you think Decentralized Finance and TradFi will cooperate? Emilio: My idea is that in the long term, I think Decentralized Finance may disappear and become an invisible layer of finance. We will have various products and tools, just like those used in TradFi today. These products will actually use Decentralized Finance at the underlying level, but users will not feel that they are using blockchain or Decentralized Finance. They will use these tools as they do today, while also enjoying the additional benefits brought by blockchain and Decentralized Finance, such as transparency and convenience. Sergey Nazarov: Tom, how do you think the user base of TradFi will ultimately utilize Decentralized Finance? Or how will Decentralized Finance interact with the TradFi community? Tom: I think Ben's perspective is correct, and this issue can be viewed from two perspectives. One is the financial market infrastructure. If this technology - Distributed Ledger Technology (DLT) can improve operational efficiency or bring network effects, allowing us to open up new distribution channels connecting sellers, issuers, and buyers from the TradFi perspective, there is ample reason for us to take this path. Introducing new asset classes through Decentralized Finance The second aspect is to view Decentralized Finance as an asset class. For example, the value of Cryptocurrency is determined by the market. TradFi has been skeptical about entering this field until the recent introduction of ETFs. However, ETFs have opened the door for this field, and regulatory authorities also allow its development. This technology has facilitated the introduction of new asset classes, whether it is tokenizing physical assets or structuring encryption assets to be accepted by institutions and regulated industries. Sergey Nazarov: How will the assets of TradFi funds and TradFi users interact with Decentralized Finance through the TradFi system? Tom: At this point...