Emerging markets today suffer from a lack of institutional funding in terms of DeFi and crypto-related solutions, Pablo Pizimbono said at the Permissionless Conference in Austin, Texas on Tuesday.
Pizimbono is the founder of Crossregional Partners and Clave, an alternative asset manager and a crypto-based direct lending platform, respectively.
Pizzimbono’s fellow panelists believe that one thing that could ease investors’ waning appetite in emerging markets is broader access to stablecoins and central bank digital currencies.
For example, CBDC tokens could simplify the launch of assets and borderless money, argued Thomas Boehner, founder and CEO of Credix Finance.
In particular, the coexistence of those things could attract institutional investment in regions like Latin America, for example, Boehner said.
“I definitely think [stablecoins and CBDCs] Can co-exist next to each other. I think it’s a great way to bring some institutions into this market, and I think we should definitely allow private stablecoins to exist, so you can provide fungibility.”
The assembled panelists seemed to agree that CBDCs are coming one way or another.
But in Pizzimbono’s view it’s a little more complicated than just the utility of different crypto assets. His company, Crossregional, manages institutional portfolios in Latin America, so he got a behind-the-scenes look at what big investors consider when entering emerging markets.
They narrowed it down to asset quality, governance, enforceability of collateral and scalability.
“You need good assets, good credit characteristics, low defaults,” Pizzimbono said.
According to Pizzimbono, efficient bankruptcy laws are another gateway for institutional investors into emerging markets.
“The ability of investors to enforce their security interests in the event of non-payment is critical,” Pizzimbono said. “in Mexico […] Even with a well-structured package, you will have little difficulty accessing their collateral due to local court systems and how complex they are.
Inefficiencies at the bankruptcy level are “too prohibitive” for local funding, Pizzimbono said.
Scalability is also important for institutions because they don’t really get a bang for their buck until they invest more than $100 million, Pizzimbono said.
Panelist Nick Carmi, Circle K’s vice president of institutional markets, echoed that sentiment.
“From my experience with investors […] They want to be able to execute in shape,” Carmi said.
This means that investing $1 million or $2 million is not enough. They want an adequate reward for the risk they’re taking, Carmi said.
Circle’s most recent foray into an emerging market came in late August with a USDC integration with Mercado Libre in Chile.
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