Coinfeeds Daily → Traditional Finance on DeFi Rails

Traditional Finance on DeFi Rails

Published: Oct 26, 2023 | Last Updated: Oct 26, 2023
Moyi Dang
An illustration of a traditional bank with classical architecture with glowing digital blockchain tracks
Image: An illustration of a traditional bank with classical architecture with glowing digital blockchain tracks

Gains Network reports surge in USD/JPY trading volume, Japan leads in stablecoin regulation, and Deutsche Bank trials SWIFT alternative for stablecoins

Traditional Finance Markets Show Interest in DeFi

The decentralized finance (DeFi) platform, Gains Network, has reported a surge in trading volume for the U.S. dollar-Japanese yen (USD/JPY) pair. In fact, the trading volume for this pair has surpassed that of the bitcoin-dollar pair (BTC/USD), indicating a growing interest in trading traditional markets over DeFi. However, transferring a significant portion of the global foreign exchange market onto a decentralized platform presents challenges due to scaling issues.

Japan Takes the Lead in Stablecoin Regulation

Japan is leading the race in regulating stablecoins, with a stablecoin law set to take effect in June. The law aims to address concerns about the backing of stablecoins and the accessibility of assets. Despite the strict requirements that could make it challenging for stablecoin issuers to make a profit, Japan's approach to regulation is seen as a model for other jurisdictions. Foreign stablecoin issuers can partner with Japanese trust banks to issue their own branded stablecoins without obtaining a special license, with the first stablecoins expected to launch in June 2023.

Deutsche Bank Trials SWIFT Alternative for Stablecoins

Deutsche Bank and Standard Chartered are testing a system that allows blockchain-based transactions, stablecoins, and central bank digital currencies (CBDCs) to communicate with each other. Known as the Universal Digital Payments Network (UDPN), this permissioned blockchain system enables transactions across various networks. The banks are currently running test cases, including transferring and swapping USDC stablecoins. The UDPN aims to provide an alternative to SWIFT for stablecoins, signaling another significant step towards the integration of traditional finance and decentralized finance.


The interest of traditional finance markets in DeFi rails is evident, with a collection of use cases featured. The shift of trading volume from BTC/USD to USD/JPY on a DeFi platform, Japan's lead in stablecoin regulation, and Deutsche Bank's trial of a SWIFT alternative for stablecoins are all indicative of this trend. However, challenges such as scaling issues and balancing security with profitability remain. As traditional finance continues to explore and integrate with DeFi, these challenges will need to be addressed.

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