Imagine this: all major financial institutions and millions of individuals trading on decentralized exchanges (DEXs). In such a future, it would be centralized exchanges (CEXs) exist? Maybe not. The very concept of “CEXs” may disappear, as “crypto exchanges” will naturally have to be built on-chain rather than running on centralized servers as all major CEXs currently do, which goes against the original intent of the 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 warnings such as the FTX meltdown, CEXs still accounted for nearly 90% of crypto trading volume as of November 2024. Why? The convenience and familiarity outweigh the obvious risks for many users.
However, the centralized nature of these exchanges means that another FTX-style implosion could occur at any time.
DeFi could be the answer, but it’s not there yet and shares some of the blame for stagnant popularity:
- Horrible user experience: Non-intuitive interfaces make DEXs inaccessible for most people.
- Technological vulnerabilities: Exploits and hacks continue to undermine trust.
- Institutional reluctance: Institutions do not trust a system that works like the Wild West.
In a sandbox discussion, everyone agrees that DEXs are amazing – eliminating counterparty risk, on-chain transparency, and trust in code versus intermediaries. But in the real world, institutions view DeFi as untested, insecure, and unregulated. They need a reliable gateway to participate.
Current financial systems are built to block interactions with unlicensed entities. Banks, asset managers and other licensed actors are structurally unable to interact with unregulated entities. This is why institutions embrace 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 remain dominant despite systemic failures like the 2008 crisis. DeFi, on the other hand, lacks regulatory standards, which has left it stuck on the margins. Regulation is not the enemy – it is the foundation for scaling this technology.
DeFi’s unregulated status is the biggest reason institutions avoid it. And that matters. Without institutional liquidity, DEXs lack credibility and trading volume. Institutions are the backbone of any financial market, and without them, DeFi cannot grow.
GRVT’s DABA license is a game changer, not just for DEXs, but for the entire DeFi ecosystem. It is the first regulated DEX, setting a precedent for how institutions and mainstream users can safely interact with DeFi.
Regulations, when implemented carefully, can be a catalyst for the growth of DeFi. 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 financing. Regulated entities provide guarantees to traditional financial actors. For example, GRVT’s DABA license creates a bridge, allowing banks, hedge funds, and asset managers to explore DeFi with confidence without 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.
- Widespread Adoption: TradFi regulations have evolved over centuries, allowing 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 our fourth hire, highlighting 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 towards reshaping how the world interacts with DeFi.
GRVT’s key features include:
- Blockchain-based self-custody: Users maintain full control over 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 resolved, the vision of a world where all institutions trade on DEXs becomes achievable. In such a world, the term “CEXs” might disappear and “crypto exchanges” would inherently mean on-chain platforms.
This is not just a vision. With GRVT, it is it’s already happening.
GRVT has now become the first DEX to gain 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 towards a more regulated, secure and compliant approach – paving the way for mainstream and broader institutional adoption of DeFi.
GRVT continues its pursuit of a Full Class F license in Bermuda, demonstrating its dedication to comprehensive regulatory compliance and its readiness to offer a wide range of digital asset services within Bermuda’s robust regulatory framework.
Concurrently, GRVT is actively engaged with regulatory authorities in multiple jurisdictions to advance its licensing efforts. These initiatives include alignment with the Cryptoasset Markets (Mica) in the European Union and collaborating with the Abu Dhabi Global Market (ADGM), a major financial center known for its innovative approach to digital asset regulation.
