In the contemporary digital age, blockchain technology and decentralized finance (DeFi) are hot topics across various stakeholders, governments, and the public. Amid these discussions, I proposed the concept of the Safeguarded Token on the first part of this articles, designed to bridge the decentralized benefits of blockchain and DeFi with essential state protections for investors.
The Safeguarded Token can be defined as a conceptual digital asset that combines the principles of decentralization found in blockchain technology and DeFi with the stability and safety provided by government regulations. This unique fusion creates a balanced system that caters to the advantages of both decentralized and centralized financial approaches, specifically focusing on investor security and interests.
While the idea is promising, implementing this technology presents its challenges, as previously outlined in the second section of this discourse. In this article, the focus will shift to exploring potential solutions that can overcome these obstacles, ensuring the Safeguarded Token’s mass adoption and the overall growth of DeFi.
1. Enhancing Market Liquidity On a global scale, the optimal solution lies in bridging the cooperation between DeFi platforms and traditional financial institutions to bolster liquidity. Innovators and governments can collaborate to create enticing incentives for market players. Boosting liquidity in the DeFi world necessitates a multi-stakeholder approach. Key strategies include incentivizing liquidity providers, partnering with traditional financial institutions, and crafting innovative products tailored to market needs. Security enhancements are pivotal to build trust, while UX optimization ensures seamless user interaction. Supportive regulations and investor education are also crucial elements to attract broader participation, reinforced by community-building activities like meet-ups and webinars. With this strategy blend, the liquidity of the DeFi market is anticipated to significantly surge.
2. Integration with the Global Regulatory System It’s imperative for international regulators and innovators to engage in open dialogue to formulate regulations that foster innovation while safeguarding consumer interests. The integration of DeFi with the global regulatory system demands intensive collaboration between blockchain innovators and global regulators. To nurture a conducive environment for DeFi’s growth, both parties must develop flexible regulatory standards that still uphold transactional integrity and safety. This includes establishing legal frameworks that recognize and back blockchain technology and the deployment of smart contracts as automatic regulatory tools. Additionally, tailored education and training for global regulators need amplification to deepen their understanding of the technology, ensuring formulated regulations are both protective and progressive.
3. Technology and Security Standardization The international realm needs to adopt consistent security standards, aided by relevant agencies to ensure the safety of users’ digital assets. In the DeFi world, technology and security standardization are pivotal to guarantee safe and efficient transactions. The primary recommendation is the establishment of a global framework outlining technical and security standards for all DeFi platforms. Such global standards will enable DeFi platforms to interact more securely and efficiently, minimizing cyber-attack risks and system failures. Furthermore, cross-country collaboration in researching and developing the latest security solutions must be augmented to ensure DeFi technology remains at the forefront of security amidst rapid technological evolution.
4. Global Collaboration between Regulators and Innovators International dialogue and discussion forums are essential to craft universally acceptable solutions adaptable by various nations. Global collaboration between regulators and innovators is the linchpin for sustainable DeFi adoption and innovation. The primary recommendation is the formation of an international dialogue forum congregating stakeholders from both sides to discuss, share insights, and strategize collectively. This forum will serve as a platform to understand challenges, opportunities, and best practices from different jurisdictions, aiming to create cohesive regulations that buttress innovation. With tight collaboration, we can anticipate the construction of a more inclusive, safe, and transparent DeFi ecosystem, propelling the growth of the global blockchain industry.
5. Engaging the Global Community The active involvement of the global community in product development processes is crucial to ensure their needs and desires are met. The participation of the global community in DeFi development and regulation is a key component. A key recommendation is the establishment of an open communication platform where the community, regulators, and innovators can converse. This platform enables the exchange of ideas, feedback, and solutions from a plethora of perspectives worldwide. Moreover, routinely hosting international conferences and workshops, highlighting the latest developments and challenging the status quo, ensures the community’s voice is both heard and valued. In this manner, the global community’s engagement guarantees that the resultant policies and innovations satisfy the genuine needs and aspirations of users, and not just the demands of regulation.
6. Availability of Technology Infrastructure Global governments and the private sector must collaborate in providing adequate technology infrastructure to support the growth of DeFi. For the successful global-scale implementation of DeFi technology, having a reliable technology infrastructure is crucial. As a recommendation, governments and the private sector should collaborate in the development and enhancement of basic infrastructures, such as high-speed internet connectivity and secure data centers. Additionally, the establishment of innovation centers and technology incubators in various regions can stimulate the growth and exploration of new technologies. Consequently, investing in technology infrastructure will not only support DeFi development but also foster an environment conducive to future economic growth and innovation.
7. Overcoming Cultural and Social Barriers A culturally sensitive approach towards the global community is vital for educating and integrating this technology into daily life. In efforts to implement new technologies like DeFi globally, cultural and social barriers often present challenges as significant as technical aspects. For this, an inclusive and educational approach is essential. The main recommendation is to launch massive educational campaigns tailored to each region’s cultural context, explaining the benefits and risks of the technology in language easily understood by the general public. Collaborations with local figures, communities, and NGOs can assist in adapting the message and building trust. This will enhance technology acceptance and minimize potential misunderstandings.
In the context of Indonesia, the idea of the Safeguarded Token was initiated by BeOneChain, part of Nakama.id. Innovations can emerge from anywhere, but whether this idea will be adopted requires support from entities like the Indonesian Blockchain Association (ABI) and the Indonesian Shariah Blockchain Association (ABSI). From the government’s side, backing from the Financial Services Authority (OJK), Bank Indonesia (BI), and the Ministry of Finance is necessary. The Indonesian government also needs to support and commit to this innovation by introducing the standardization issue of DeFi based on Safeguarded Token in forums like ASEAN, WEF, or even proposing it to the BRICS forum where Indonesia is currently seeking membership.
In my view, BRICS is more likely to embrace this idea because BRICS aims to become an alternative global economic powerhouse, and cryptocurrency finance could be a potent alternative to achieve this mission. Especially given BRICS’s strong inclination to establish its standard currency for international trade. Apart from the government and community, universities’ involvement as research and development centers offering detailed recommendations for the Safeguarded Token idea is crucial. The role of the existing financial and fintech industry is also significant, especially if this can be tested and integrated into the current industry, for instance, with platforms like Gopay, Xendit, Ajaib, Dana, etc.
Indonesia has a great opportunity to become a global crypto innovation hub if there’s strong synergy among the various entities mentioned. Given the demographic bonus of a young population, a significant number of crypto investors, the innovative blockchain product developments by the local web3 community, and digital nomads innovating in places like Bali, this isn’t far-fetched.
Although DeFi offers vast opportunities for global financial innovation, its implementation requires close collaboration among all stakeholders, and Indonesia can quickly take the lead. With the right collaborative approach, existing barriers can be overcome, paving the way for a more inclusive and transparent digital financial future on the global stage.