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Morgan Stanley: Regulations and Overcollateralization Likely to Affect DeFi

The gold Defibrillates word and silver coins for business or crypto currency concept 3d rendering.

Investment bank Morgan Stanley says that the exponential growth in the decentralized finance sector will possibly be affected by regulations and over-collateralization.

Source: Coindesk

ETHUSD is up +4.01%

The bank adds that despite the hype around decentralization in DeFi and the lack of intermediaries, there is no evidence that the system is better than the conventional one.

Morgan thinks that the inadequate KYC and anti-money laundering processes in DeFi will limit institutional adoption while their implementation will compromise decentralization.

The firm adds that the DeFi will remain small in the near term as regulators are yet to set a regulatory framework customized to the sector.

The institution attributes the recent surge in DeFi to the easing of programs by banks, which caused DeFi’s TVL to jump to $200 billion from $600 million in 2020.

Decentralized Finance is a lending and borrowing blockchain function which offers investors high returns to boost their value.



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