S&P Global 2022 Global Credit Outlook Report: DeFi will not replace traditional finance

Time:2021-12-28 Source: 951 views NFT Copy share

Financial information analyst S&P Globoal (hereinafter referred to as Standard & Poor's) announced the "Global Credit Outlook to 2022" on December 1, stating that DeFi's role next year will continue to be an aid to the traditional financial system, rather than a replacement. Seizing high-cost liquidity needs will likely grow in the next few years.

DeFi will not replace traditional finance, regulation or accelerate intervention next year

S&P pointed out in the report that DeFi is still in its infancy, and there is no significant overlap between its customer base and the traditional financial system. DeFi applications are currently limited to transactions in the cryptocurrency ecosystem, such as purchases, swaps, loans, or cryptocurrency insurance. , Which makes it difficult to threaten the traditional financial system in 2022.

S&P further stated that DeFi’s advantage lies in its potential for high-cost activities (high borrowing, financing, etc.). If it develops well, it will bring higher profits to the institutions that use it, and if DeFi gradually grabs The existing liquidity of funds will directly affect the organization's funding options (but S&P still emphasizes that this will take several years).

S&P believes that if there is a global wave of DeFi regulation in 2022, it will allow more participants in the traditional financial system to participate in DeFi: The progress of the regulatory debate may help it frame and grow substantially in 2022. The implementation of supervision is a prerequisite for many traditional institutions/investors to enter DeFi.

Standard & Poor's pointed out that there are multiple conditions in the existing DeFi, which may further promote regulatory intervention:

*The liquidity fluctuation between the cryptocurrency market and the traditional financial market

*Technical vulnerability risk (many projects can be proved by hacking)

*DeFi increases the opacity of financial transactions

*The decentralized monetary system may interfere with the power of the central bank's monetary policy (it cannot be effectively handled during a financial crisis)

*Price fluctuations and lack of supervision have greatly increased the risks of retail investors and institutions

Although there is no one-sided pursuit of DeFi trends, S&P also pointed out that the traditional financial system must continue to innovate and invest in order to maintain competitiveness.

Chief Executive Officer of Galaxy Digital: 2022 will be led by DeFi

As previously reported, Mike Novogratz, the billionaire and CEO of Galaxy Digital, is more optimistic about the development of DeFi next year. He said that although investors did not show their love for DeFi in 2021, he expects DeFi to dominate in 2022. Status, the regulator’s concern about DeFi’s inability to obtain personal data (KYC) is also expected to be resolved.

U.S. registered investment adviser Ritholtz Wealth Management and ETF issuer Wisdom Tree have collaborated to create a new encryption index RWM Wisdom Tree. DeFi, Metaverse and other topical currencies have also been introduced into the index configuration, which shows that related topics are not just around BTC and ETH. .

According to data from DefiLlama, the total amount of DeFi locked up has soared since this year, reaching a scale of 248 billion U.S. dollars before the deadline. Various new projects have also risen like the Warring States Period. The top 5 DeFi protocols currently ranked by lock-up amount are:

Curve ($23.01 billion)

Convex ($19.08 billion)

Maker ($18.08 billion)

AAVE (US$14.51 billion)

WBTC ($12.42 billion).

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