The emergence of cryptocurrencies and blockchain technology immediately symbolized a challenge to the centuries-old dominance of the traditional banking sector. In fact, it's hard to even think about finance without banks or Wall Street because they have positioned themselves as an irreplaceable and trusted intermediary in the increasingly complex economic system.
So naturally, after dismissing cryptocurrencies, once Bitcoin started gaining traction and demonstrated that centralized institutions can be replaced, institutional leaders became more vocal in their attacks. Well-known figures from mainstream finance like Warren Buffett and JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon branded Bitcoin and cryptocurrencies as “a gambling device,” “rat poison,” and “for criminals.”
As the financial world gradually began understanding the unique characteristics of blockchain’s decentralized ledger and its ability to efficiently process transactions, the industry’s tune started to change. Major banks began researching and experimenting with blockchain technology, becoming increasingly interested in digital asset sectors such as decentralized finance (DeFi) and tokenized real-world assets.
However, blockchain’s public and transparent nature creates problems for institutions that are bound by strict regulatory constraints. Privacy concerns and the ability to view entire financial histories through blockchain’s public ledger have led many institutions to turn to private, or “permissioned” blockchain networks with gated access. But these networks are isolated from the vast majority of public decentralized protocols and the billions in liquidity that they hold.
Vixichain, a young startup, aims to bridge the gap between the current regulatory and technological frameworks that delay institutional involvement and DeFi’s innovative promise. As a regulated entity, Vixichain is building a private blockchain specifically for financial institutions that empower them to securely engage with the world of digital financial solutions available in the semi-regulated digital assets space.
The project recently announced that it raised $7 million in an ongoing private funding round to enhance the development of its institution-friendly blockchain protocol. Vixichain onboards banks and other institutions to serve as network validators, receiving transaction fees in return as an incentive for validating blockchain transactions.
Despite the contradicting values and operations that divide the decentralized and traditional financial sectors, many within the blockchain and cryptocurrency space are beginning to recognize the benefits of traditional institutional involvement.
Speaking on the value traditional finance could bring to the digital asset sector, Vixichain CEO and Founder Roy Mayer said:
“There is no way to achieve real mainstream Web3 adoption without involving financial institutions. Despite being centralized, banks bring a lot to the table such as risk management strategies, liquidity, and credibility which can’t be underestimated.”
Vixichain recognizes that institutional participation in the decentralized economy is mutually beneficial and can boost mainstream adoption as banks still enjoy a great amount of trust. The project also recognizes that traditional institutions can’t simply abandon adherence to strict regulatory compliance and consumer privacy protections.
On this matter, Mayer adds:
“Since most financial institutions are hesitant to interact with public blockchains due to legal and privacy concerns, Vixichain offers a secure environment that balances privacy and transparency while enabling them to engage with public blockchains.”
To allow institutions to interact with digital assets in a way that makes them feel comfortable, Vixichain’s innovative protocol leverages the same technology behind non-fungible tokens (NFTs). Its NUSD stablecoin, backed by fiat currency and stored in a fully transparent trust fund, acts as a secure and traceable bridge between Vixichain’s permissionless chain and the rest of the cryptocurrency ecosystem. This mechanism ensures institutional-level privacy and compliance without limiting exposure to DeFi and Web3.
In addition to NUSD, the platform’s native VIXC token, and Vixi Web3 Wallet enable users to store, send, and receive tokens, allowing them to select their preferred institution to validate the transaction.
To maintain cryptocurrency and DeFi’s momentum, there is a severe need to leverage institutional liquidity and credibility to expand the ecosystem. Innovative solutions like Vixichain’s that bridge the two sectors are a welcome addition to Web3.