Accenture, blockchain technology can cut infrastructure costs for major investment banks by an average of 30%, translating to annual savings of $8-$12 billion.
Blockchain\'s cost-saving potential is particularly significant for structured products due to their complex lifecycle management. Blockchain\'s enhanced transparency and audit trails can help reduce these regulatory capital requirements.
Enhanced Composability to Creating Customizable Financial Solutions
Smart contracts are particularly compelling for managing complex financial products like derivatives and structured products, allowing for quick and innovative financial engineering. This modularity enables investors to craft tailored products, such as combining yield-generating DeFi protocols, tokenized assets and risk-managing derivatives like options or futures.Improving Accessibility for Originators and Investors
Structured products have historically been accessible only to institutions. Blockchain modularity simplifies structuring and origination by eliminating intermediaries, while fractional ownership broadens investor access and reduces friction on both the supply and demand sides.Growth of the DeFi Structured Products Market
Structured products offer advanced risk management through mechanisms like principal protection and downside barriers. Over the past year, DeFi structured products like Pendle ($6bn TVL) and CESR Composite Eth Staking Benchmark, provides investors reliable and powerful references to express their market views and serve as risk management tools.Tokenization: Tokenization is foundational for bringing structured products on-chain, with TVL reaching $130-170bn (including stablecoins) in 2024 according to RWA.xyz.
One of the pervading sentiments within crypto is that the products often exhibit barbell-shaped risk-return profiles. Structured products solve this dilemma by creating a specific risk-return profile while capturing the substantial upside of this asset class. One example here is principal-protected notes mitigating depegging risk.
The path forward for on-chain structured products doesn\'t begin with the technology, but in developing compelling use cases to showcase their potential. As tokenization advances, integrating traditional and crypto assets in structured products will become more increasingly common, further narrowing the gap between traditional finance and crypto.
Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.