Decentralized finance had been gaining popularity in 2020 and 2021 a lot of the trend definitely continues and will go on in 2022 as well. Now, the online publication the Daily Hodl notes that DeFi will continue to complement the traditional finance system rather than supplant it in 2022.
This is what a report by financial information and analytics provider S&P Global revealed recently.
DeFi vs traditional finance
According to the firm’s Global Credit Outlook for 2022, the traditional finance sector will need to innovate and invest in order to be able to remain relevant in the coming year.
“We believe it will continue evolving in 2022 toward complementing the current financial system rather than substituting financial services companies.”
The same notes revealed:
“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.”
It’s also worth noting the fact that most DeFi apps are not competing with traditional finance at the moment, but the report says that this could soon change.
“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.”
The same report said that the most profitable activities in the traditional finance sector stand to be disrupted the most.
The notes also reveal that regulatory progress in 2022 could be bringing more players in the traditional financial system into DeFi.
“Progress in the regulatory debate could both frame and spur growth in 2022.”
We suggest that you check out the complete notes in the original reports in order to learn more about the available details.
Stay tuned for more news, and also make sure to keep your eyes on the market.