The financial information and analytics provider S&P Global recently released their 2022 outlook which includes a great deal on DeFi. Needless to say, the firm is one of the best in business when it comes to analytics and research. As 2021 is coming to an end not with a bang but a whimper, S&P believes 2022 will not be as advertised. According to the research, DeFi still has a long way to go before supplanting traditional finance. However, the believe that sometime in the future, DeFi can take over.
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DeFi Needs Work!
According to the firm’s global outlook for 2022, DeFi will continue to complement traditional finance and not replace it. This could be interpreted as a warning to both sides since the rapid evolution calls for dramatic innovations. Traditional finance has been mostly unchallenged in history up until the emergence of DeFi. Realistically, Decentralized Finance is still at infancy stage and needs at least a few years to tackle on dethroning the old ways.
“We believe it will continue evolving in 2022 toward complementing the current financial system rather than substituting financial services companies.
To remain relevant, we think incumbent players will have to further step up investments in new technologies – otherwise, the balance could shift away from them in the longer run.”
What it means is that according to the firm, in contrary to what the influencers on Twitter might say, Crypto will not replace fiat in 2022. For that, DeFi needs a lot more innovation and development. In that regard, the process can take a few years.
Traditional Finance needs to Step Up!
On the other hand, this should not be a good news for traditional finance and central banks. As stated in the report, the situation could radically change in the future. With enough innovation, Decentralized Applications can take over Traditional finance.
“Most DeFi applications (DApps) currently don’t compete with incumbents.
They are mostly still restricted to transactions within the emerging digital ecosystem – for instance for the purchase, exchange, lending, or insurance of digitally native assets.
But this could change as technology and acceptance evolve.”
As for 2022, there are two primary sectors to keep an eye on. Regulatory actions specially in the US and crypto market capitalization. These two are directly stated in the report and are of utmost importance for the future of cryptocurrencies.
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