A new report prepared by S&P Global, an intelligence gathering and data company, predicts that the cryptocurrency and the decentralized finance sectors will keep growing in 2022. The report, titled Global Credit Outlook 2022, declares that while crypto institutional investments are still concentrated in a few companies, this could lead to other institutions following suit. The report states:
Three companies–Block.one, MicroStrategy, and Tesla–hold almost 84% of corporate investments in bitcoin. Yet, growing interest from institutional investors augurs accelerated expansion for cryptocurrencies as investment vehicles.
According to the report, tokenization could also be a powerful force to help people invest in assets they would not be able to without these tools. Tokenization, in other words, could provide the possibility of democratizing opportunities. Regulation will also be an important part of the next year, with the industry still needing “a regulatory framework that recognizes the rights of token holders and smart contract protocols.”
Defi Will Not Put Traditional Finance in Jeopardy
When it comes to decentralized finance, the report states that while the sector will keep growing, it will not jeopardize the traditional structures that manage banking and finance. However, these institutions will have to adapt to what users expect of financial platforms today. The report declares:
Defi will continue to complement, not supplant, traditional finance in 2022. 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.
Regulation will be a key factor in the growth (or stagnation) of the decentralized finance area during the next year, according to the report. S&P Global believes that the growth in volumes and the rise of stablecoins in the space will put pressure on the regulatory debate, but it is unlikely that regulators will jump to address these issues quickly because they often still lack the frameworks to fully monitor crypto assets, and this becomes a challenge in itself.