The growing trend of decentralized finance seems unstoppable. The Defi sector has exhibited massive excitement so far in 2020. The meteoric surge reflects that users are swiftly interacting with the ecosystem, as it gives new borrowing and lending solutions to its users by using blockchain technology, smart contracts, and cryptocurrencies.
The rising wave of DeFi platforms is giving a set of regulatory difficulties to financial institutions. Nitin Gaur, IBM financial services director, announced that the firm is working to assist financial institutions in order to gain benefit from DeFi protocols.
Gaur says it is fundamental that banks comprehend and grasp the DeFi sphere. Else, he states it could disturb their whole business model in the long run:
“I think that the financial institutions should understand it because it has the potential to eventually sort of take over and subside the business elements of existing business models. And that’s one reason why a bank should do it.”
DeFi Continues to Surge While Financial Institutions Waits to Enter
DeFi protocols are presenting new opportunities that financial institutions need to acknowledge in order to thrive in this ecosystem. According to market analysis, most financial institutions are simply digitizing traditional securities or stuck in the early stages of DeFi. Despite, Gaur anticipates an entrance “of the large banks, starting with investment banks.”
Disclosing company plans, he added that IBM intends to unite banks, “into the dynamicity of the global marketplace that the DeFi space has to offer, not to mention the innovation into products, creating new competing products, and creating sort of add-on products.”
While crypto experts are anticipating major banks to enter the DeFi space, the market report revealed that the DeFi sector continues to exhibit an active increase. Recently, DeFi total market cap has reached $11 billion threshold.