An intelligence and data firm, S&P Global suggests that decentralized finance and crypto trends will continue their growth cycle in 2022. The company highlighted the current state of the market in its latest report and said that even though there are several problems that could hinder adoption, it is likely that the sector will continue to gather steam in the coming year and complement the traditional financial system. The title of the report is Global Credit Outlook 2022 and it revealed that even though crypto institutional investment is concentrated in just a few companies, this could result in other institutions following the same route.
According to the report, 84% of the institutional investment in bitcoin comes from three companies, which are Tesla, MicroStrategy and Block.one. However, increasing interest from institutional investors can accelerate the expansion of these digital currencies as an investment vehicle. The report also added that tokenization could prove to be a powerful force in assisting people when it comes to investing in assets they wouldn’t be able to do without. In other words, tokenization could give rise to the possibility of democratizing opportunities. The report said that regulation would also be an important factor next year, as the crypto industry still requires a regulatory framework that recognizes smart control protocols and the rights of token holders.
As far as decentralized finance is concerned, the report said that while this space will continue growing, it will not pose a risk to the traditional structures associated with banking and finance. However, when it comes to user expectations, these institutions will have to adapt. The report asserted that decentralized finance would complement traditional finance in 2022, rather than supplant it. It indicated that defi would continue to evolve in the next year for complementing the existing financial system instead of substituting financial services.
However, the players of the existing system would have to step up their investments in innovative technologies in order to stay relevant. The report did point out that regulation would make a big difference when it comes to the crypto and decentralized finance arena because it can lead to growth, or it can also cause stagnation. S&P Global believes that the rise of stablecoins and the growth of volumes in decentralized finance and the crypto space will increase the pressure on the regulatory debate. Nonetheless, it remains unlikely that regulators will make decisions about it in a hurry because they still do not have the framework that’s needed for fully monitoring the crypto assets.
This is a challenge itself and one that regulators in different countries will have to overcome first, before they can think about regulating cryptocurrencies. Of course, this hasn’t stopped countries from working on legislation for these digital currencies because their popularity is growing rapidly and they are being widely used by people. Some countries like China have chosen to go against cryptocurrencies, while others are looking towards this space more favorably, even if they do not want to use them as a means of payment.
