The Architecture of Decentralised Finance Platforms: A New Open Finance Paradigm

Abstract

The evolving merger of payments technology with technology underpinning investment markets’ infrastructure can have a great impact on the mode of supply of financial services, notwithstanding technical, legal and regulatory restrictions. One-stop-shop multi-purpose and multi-asset platforms will be a key characteristic of post-COVID-19 finance bringing a radical transformation of the marketplace. Anticipated benefits range from a drastic reduction of intermediary rents and transaction costs to repatriation of investor control and alteration of today’s narrow asset allocation strategies. To facilitate this transformation, we offer a model of decentralised finance that goes far beyond so-called “autonomous” finance. As the technical and regulatory challenges of increasing automation and integration in the supply of investment services will be considerable, a proactive approach is required to resolve these problems. Integrated decentralised platforms are the most promising route to: (a) counter the competitive threat of BigTech, (b) reform investment industry’s narrow asset allocation practices whose fragility has been badly exposed by the pandemic, and, (c) spread equally the dividend of financial development.

Keywords: Open Finance, Decentralised Finance, Investment Democratisation, Cryptographic Integration, Inclusive Finance, Financial Systems, SMEs, Access to Finance, Tokenisation, DLT-Blockchain, Financial Services, FinTech, RegTech, Sustainable Finance, Social Market Economy, Parametrisation