1inch Davos conference: Freedom, trust and security

Here’s the final post in our series of highlights from Shaping Tomorrow’s Financial Landscape Through DeFi – the conference 1inch held at the World Economic Annual Meeting in Davos.

Christine Lee, Senior Anchor at CoinDesk, moderated a panel discussion on "Freedom, Trust and Security: Navigating Permissionless DeFi vs. Custodial Models."

She was joined by Diana Barrero Zalles, Head of Research and Sustainability at GBBC, Yves Holenstein, Head of Custody & Staking at Bitcoin Suisse AG, Juergen Hofbauer, Head of Partnerships at Taurus SA and Sebastien Borget, COO of The Sandbox.

The panelists explored the balance between self-custody and custodial models, examining how institutions, DeFi projects and gaming platforms approach security, accessibility and user autonomy across different contexts.

Self-custody vs. custodial models: a trade-off

Yves Holenstein shared his perspective on the trade-offs between self-custody and custodial models, particularly for institutions.

"When we were founded more than ten years ago, the ethos was ‘Not your keys, not your tokens’ –  having full control over everything. But as our customers grew, some became afraid of operational risks," he said.

For some users, self-custody makes sense, while for others, security concerns make custodians a more viable choice. "It’s an individual decision," Holenstein concluded," and it depends on the value at risk."

The role of custodians in institutional adoption

Juergen Hofbauer weighed in on how custodians enable institutional players to enter the digital asset space.

"The clients we serve are banks that want to move into the space but don’t have the technological setup they need."

Hofbauer emphasized that while CeFi remains stable and reliable, DeFi is where true innovation happens:

"If I think about where innovation happens, it’s not on the CeFi side…you need DeFi for that."

He explained that while institutional players are hesitant to manage custody themselves, they see value in DeFi for expanding distribution and attracting investors:

"Asset managers might think: ‘Do I really want to build up my custody solution?’ No, they want to rely on traditional custodians. But when it comes to distribution – how they can  generate more, how they can have more investors – that's when they then look into DeFi."

Gaming, crypto adoption and self-custody

Sebastien Borget noted that in many countries, play-to-earn gaming provides financial opportunities:

"The leading countries bringing players who can earn a few dollars a day are Indonesia, the Philippines, Thailand and Vietnam. These nations are also among the top crypto-adopting nations – not for speculation, but as a way to fight inflation or currency instability."

Borget emphasized that self-custody is crucial for players in these markets, as it allows them to fully control their earnings:

"Once players have a wallet, they start building their wealth. The tokens they earn can be exchanged for other game currencies or used in real life for daily expenses."

Adding to the discussion, Juergen Hofbauer pointed out that users in lower-income regions typically rely on software wallets due to cost constraints:

"In countries where ten dollars is a lot of money, doing self-custody and paying fifty or a hundred dollars for a hardware wallet kind of defeats the purpose because they don’t have the money for that. So they're typically relying on software wallets – either directly inside an app or a separate app."

The future of DeFi and regulation

As the conversation turned to regulation, Diana Barrero Zalles stressed the need for industry standards and governance frameworks:

"There is a need for good governance, which right now exists but is not standardized and not necessarily a requirement. And that’s really important in order to prevent fraud and protect the people who can afford it the least."

Meanwhile, Yves Holenstein suggested that U.S. regulatory shifts could impact global banking engagement with DeFi:

"I expect that the new administration will restrain U.S. authorities - like OFAC, the Office of Foreign Assets Control - making the global banking system and regulated players feel less restricted in their actions."

Looking ahead: trends for 2025

Juergen Hofbauer, shared his outlook on institutional adoption, emphasizing the impact of U.S. regulatory shifts:

"We are very positive about this year. There are multiple factors that we have seen – one big factor, which we spoke about, is the U.S. opening up again and becoming more crypto-friendly. That’s an important country for this, and that will trigger more institutional players to enter the space."

Diana Barrero Zalles pointed to DeFi's expansion in emerging markets and the need for regulatory clarity:

"I think progress on definitions, regulatory developments and actual adoption - especially in emerging markets - will be key. The recent Chainalysis report mentioned the incredible growth we’re seeing in areas like Latin America, where there is a real need for access to networks, markets and a democratization of financial services that can change the world for the better."

Sebastien Borget predicted that gaming would continue to drive crypto adoption, with user-generated content and AI-powered experiences playing a crucial role:

"Gaming will continue to lead the way in adoption. We are seeing better games, more mature games– both AAA studios and indie developers thriving in the space. Telegram mini-apps have a fantastic distribution network, driving massive growth," he said. "I also see AI connecting to gaming in many ways – enhancing gameplay, bringing characters to life and creating new quests," he concluded.

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