Key Insights:
The Italian central bank is collaborating with a consortium of companies to enable traditional finance to evolve into the DeFi ecosystem.
They would work together to launch the "Institutional DeFi for Security Token Ecosystem Project."
This development comes from Italy's recent regulation of crypto domestically. The 2023 budget includes a 26% capital gains tax on crypto profits.
Although the Bank of Italy slammed crypto in a report for underdelivering on its promises, it pledged to support the growth of DeFi. Well, they sure did.
Milano hub, the innovation centre of Italy's central bank, is the convener of the DeFi project. It chose a project proposal by Certif Advisory, amongst others.
Certif Advisory would lead the other companies, including the Ethereum scaling solution Polygon, crypto custodian Fireblocks, Web3 studio DVRS, technical developer Reply, legal and tax consultant Linklaters, Italian banks, asset management firms, and financial institutions.
The program intends to build a regulated environment for exploring security token trading, tokenization of assets, and executing transactions using DeFi applications.
Based on analytic projections, the tokenized securities market could reach $4 trillion to $5 trillion by 2030.
Unsurprisingly, banks and other financial companies are interested in participating in it.
The selected projects would get developmental support from Milano Hub for six months in the form of regulatory studies, financial expertise, conferences, and events with representatives from the project. It would, however, not get marketing support.
The project's main objective is to enable institutional market users to participate in DeFi activities while obeying the regulations.
Milano hub seemed bullish ahead of the project,
"DeFi is an innovative financial technology based on decentralized protocols that aim to replicate existing financial services inclusively and transparently."
Certif Advisory was equally enthusiastic. The general manager Imanuel Baharier opined that the whole financial system could benefit from the partnership.
"We believe it is vital to create the conditions for DeFi to become a safe and open operating environment for supervised entities as well."
The global head of Institutional Capital at Polygon Labs, Colin Butler, also said,
"It's groundbreaking to see a G7 Central Bank, the regulator, and associations of banks and funds collaborate in this way on a large-scale tokenized asset initiative."
"This is another great example of institutions seeing the relevance of blockchain to their business processes and choosing Polygon as the infrastructure layer to launch their DeFi ecosystem."
With Polygon chosen as the lead platform for the DeFi project, there's bound to be an effect on the price of its native token, MATIC.
MATIC is down by 17% in the last 11 days, bringing its value to $0.73, with its price indicators going from bullish to bearish. However, the partnership of the Bank of Italy with Polygon is expected to boost the price of the MATIC token.
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