Banco Santander

Regulated decentralized finance that combines permissioned layer-two protocols and a public blockchain network could be the future of fintech.

John Whelan, the head of Banco Santander’s blockchain lab in Madrid, recently touted the potential for increased decentralized ledger technology adoption in mainstream finance.

Speaking during a webinar organized by Fintech Surge and the Future Blockchain Summit on Wednesday, Whelan remarked:

“I could imagine a future where there is a global settlement network for an asset class of securities that operates in a fully controlled, private, permissioned layer-two on top of a public blockchain network.”

While acknowledging that current public blockchain networks might not be optimized for high-frequency transactions, Whelan highlighted their suitability for settlements in the financial services arena.

“Settlement is not something that has to happen instantaneously,” Whelan stated, adding: “Usually in the financial market, settlement is T+5 — we agree on a trade and we wait five days for settlement.”

For Whelan, stakeholders in the financial services industry see significant potential in reducing the settlement throughput via blockchain networks.

The Banco Santander digital asset chief also stated that DLT utilization in mainstream finance needs to reach a point where ERC-20, or any other blockchain-based token standard, becomes suitable for use in what Whelan termed “regulated DeFi” or “reg-DeFi.”

Earlier in April, Rune Christensen, CEO of decentralized finance unicorn MakerDAO, stated that DeFi will require regulatory clarity to move from its current isolated bubble phase toward more significant interfacing with mainstream finance.

Whelan also touched on the recent announcement that Banco Santander was one of three financial institutions selected by the European Investment Bank to issue a two-year 100-million-euro ($120 million) digital bond. According to the bank executive, the legal record of ownership is domiciled entirely on the public Ethereum blockchain.

Societe Generale, one of the other banks chosen for digital bond issuance by the EIB, also recently issued a security token on the Tezos blockchain.