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Picture this: all major financial institutions and millions of individuals trading on decentralized exchanges (DEXs). In such a future, would centralized exchanges (CEXs) even exist? Perhaps not. The very concept of “CEXs” might fade away, as “crypto exchanges” will naturally have to build on-chain, rather than running on centralized servers, as all leading CEXs currently do, which goes against the original intent of Bitcoin, blockchain, and the vision of decentralization.
Yet here we are. Users are so comfortable with CEXs that they ignore a basic fact: centralized exchanges have little to do with blockchain technology. They run on private servers, not on-chain. They settle trades in closed systems, not on-chain.
Technically, any CEX could face another FTX-like collapse. It’s a sobering thought, but not far-fetched.
Despite repeated wake-up calls like the FTX collapse, CEXs still account for almost 90% of crypto trading volume as of November 2024. Why? Convenience and familiarity outweigh the glaring risks for many users.
However, the centralized nature of these exchanges means another FTX-style implosion could occur at any moment.
DeFi could be the answer, but it’s not there yet, and it shares some of the blame for the stalled popularity:
- Horrible user experience: Unintuitive interfaces make DEXs inaccessible to most people.
- Technological vulnerabilities: Exploits and hacks continue to erode trust.
- Institutional reluctance: Institutions don’t trust a system that operates like the Wild West.
In a sandbox discussion, everyone agrees that DEXs are amazing—eliminating counterparty risks, on-chain transparency, and trust in code over intermediaries. But in the real world, institutions see DeFi as untested, unsafe, and unregulated. They need a trusted gateway to participate.
Current financial systems are built to block interactions with unlicensed entities. Banks, asset managers, and other licensed players are structurally unable to engage with non-regulated entities. That’s why institutions stick to CEXs—not because they love them, but because they have no alternative.
Like it or not, TradFi has centuries of regulations that allow it to stay mainstream despite systemic failures like the 2008 crisis. DeFi, by contrast, lacks regulatory standards, which has left it stuck in the margins. Regulation isn’t the enemy—it’s the foundation for scaling this technology.
The unregulated status of DeFi is the biggest reason institutions avoid it. And it matters. Without institutional liquidity, DEXs lack credibility and trading volume. Institutions are the backbone of any financial market, and without them, DeFi can’t grow.
GRVT’s DABA license is a game changer, not just for DEXs but for the entire DeFi ecosystem. It’s the first regulated DEX, setting a precedent for how institutions and mainstream users can safely engage with DeFi.
Regulations, when implemented thoughtfully, can be a catalyst for DeFi’s growth. Here’s why:
- Security and Compliance: Regulatory frameworks establish operational standards and safeguards against fraud and misconduct. For example, licensing ensures adherence to KYC (Know Your Customer) and AML (Anti-Money Laundering) protocols, addressing one of the biggest hurdles for institutional investors.
- Institutional Trust: Trust is the currency of institutional finance. Regulated entities provide assurance to traditional financial players. For instance, GRVT’s DABA license creates a bridge, enabling banks, hedge funds, and asset managers to confidently explore DeFi without the fear of regulatory backlash.
- Counterparty Risk Mitigation: Unlike CEXs, where users must trust the exchange to hold and settle assets, GRVT leverages blockchain technology for self-custodial settlements, eliminating the risk of mismanagement and fraud.
- Mainstream Adoption: TradFi regulations have evolved over centuries, enabling global financial markets to thrive. DeFi must adopt similar standards to gain mainstream legitimacy.
From day one, GRVT has been committed to setting a new standard for DEXs and DeFi. Our General Counsel was the fourth hire, underscoring our dedication to compliance and regulatory excellence. Achieving regulatory approval as the world’s first licensed DEX is more than a badge of honor—it’s a practical step toward reshaping how the world interacts with DeFi.
Key features of GRVT include:
- Blockchain-powered self-custody: Users retain full control of their assets.
- On-chain transparency: Every transaction is recorded on the blockchain, ensuring trust and accountability.
- Institution-ready security: Enhanced safeguards that mirror traditional finance.
If the hurdles in DeFi—user experience, security, and regulatory clarity—are addressed, the vision of a world where all institutions trade on DEXs becomes achievable. In such a world, the term “CEXs” might vanish, and “crypto exchanges” would inherently mean on-chain platforms.
This isn’t just a vision. With GRVT, it’s already happening.
GRVT has now become the first DEX to secure regulatory approval, having obtained the Class M Digital Asset Business License from the Bermuda Monetary Authority (BMA).
This sets a new global standard for decentralized finance and marks a pivotal moment in the industry’s evolution toward a more regulated, secure, and compliant approach – paving the way for mainstream and wider institutional adoption of DeFi.
GRVT is continuing its pursuit of a Full Class F license in Bermuda, demonstrating its dedication to comprehensive regulatory compliance and its readiness to offer a broad spectrum of digital asset services within Bermuda’s robust regulatory framework.
Simultaneously, GRVT is actively engaging with regulatory authorities in multiple jurisdictions to advance its licensing efforts. These initiatives include aligning with the Markets in Crypto-Assets (MiCA) framework in the European Union and collaborating with the Abu Dhabi Global Market (ADGM), a leading financial center known for its innovative approach to digital asset regulation.
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