BlackRock Executive: Knowing Who Counterparties Are Is Key to Engaging Institutions in DeFi

NEW YORK - Developing digital identity infrastructure such that counterparties know who they are trading with is critical to getting large institutions involved in decentralized finance (DeFi), said Joseph Chalom, head of strategic partnerships at BlackRock, at the State of Crypto Summit held by Coinbase and the Financial Times in New York on Thursday.

Identifying counterparties may be important for large regulated institutional players like BlackRock, the world's largest asset manager, but it might contradict the privacy ethos of crypto natives. However BlackRock has recently emerged as a potentially priority-setting player in the industry by applying this month to list a bitcoin exchange-traded fund (ETF). Given its size, its desires might have a greater shot at becoming industry rules than the often-anonymous folks who have long steered crypto.

"The first issue is, who am I trading with?...We go to jail, if we don't know who we're trading with," Chalom said of institutions such as BlackRock, adding that he is not optimistic that the digital identity issue will be solved in the short term.

Issues such as the automated market making in DeFi instead of central order limits books are just fig leaves, said Chalom. "We need clear understanding of who is in a pool," Chalom noted.