- This initiative seeks to support a project by Cetif Advisory to research a security token ecosystem for institutional DeFi.
- The project aims to create a safe DeFi environment for supervised entities and extend the analysis of security tokens on secondary markets.
- Cetif Advisory’s Lionity platform will be developed to serve as an institutional-grade automated market maker for institutional market participants.
The Bank of Italy has announced a collaboration with the Ethereum scaling team Polygon and crypto infrastructure provider Fireblocks to launch a pilot program to establish a regulated platform for “institutional DeFi.”
This collaboration is significant because it brings together a G7 Central Bank, financial regulators, and bank associations to work on a large-scale tokenized asset initiative.
The Bank of Italy’s Milano Hub innovation center will support a project developed by Cetif Advisory to look into a security token ecosystem for institutional decentralized finance (DeFi). The project will be developed in collaboration with The Bank of Italy’s Milano Hub innovation center.
Despite the recent negative sentiment in the blockchain industry, Milano Hub expressed excitement about exploring the potential of blockchain technology and the DeFi sector.
Creating a Regulated Environment for Security Token
The DeFi pilot program aims to create a regulated environment for security token trading while also experimenting with various designs.
This collaboration also demonstrates how, despite recent global crackdowns, major financial institutions remain interested in blockchain technology and its potential.
Italy’s approach to cryptocurrency regulation has evolved, and the government’s 2023 budget, passed in December, included a 26% capital gains tax on crypto profits.
In a 34-page report published in June, the Bank of Italy criticized cryptocurrencies for failing to meet promises about the financial system’s efficiency, resilience, and transparency. The report also advocated for stricter regulations to mitigate risks in the sector while still supporting DeFi and regulatory-compliant crypto activities.
This development support for selected projects under this collaboration is set to begin later this month.
Milano Hub will provide participants with six weeks of mentorship and guidance, including seminars, events, and conferences with banking, finance, and regulatory experts.
Other project participants include Fireblocks, an institutional digital asset custodian; DVRS, a development team focused on automated market maker exchanges; and Polygon Labs and Milano Hub.
Several Italian banks, asset management firms, and financial institutions will also take part in the initiative.
Cetif Advisory Will Support the DeFi Project
According to the announcement, the DeFi project “Institutional DeFi for Security Token” will be supported by Cetif Advisory, a consultancy affiliated with the Cetif Research Centre at the Università Cattolica del Sacro Cuore of Milan.
Cetif Advisory will coordinate efforts with Polygon Labs, Fireblocks, tech developer Reply, legal and tax consultant Linklaters, and web3 studio DVRS.
The platform aims to enable traditional financial institutions to experiment with security tokens and conduct secure and regulated transactions using DeFi infrastructure. This initiative comes as central banks around the world investigate the potential of central bank digital currencies (CBDCs) and look for ways to incorporate blockchain technology into their existing payment systems.
Tokenization has recently emerged as a major trend in the crypto space, with traditional financial institutions and crypto asset firms embracing the concept of tokenizing various assets on the blockchain, such as bonds and equities.
According to a Bank of America report, this transformation is expected to make transactions more efficient by lowering costs and creating a more efficient financial infrastructure.
