Fed rate cut could be beneficial for DeFi and stablecoins: Fidelity
An expected cut in interest rates by the Federal Reserve in the United States could revive the interest of major institutions in decentralized finance (DeFi) and stablecoins – as long as the infrastructure is further developed this year, according to asset manager Fidelity.
In the year In its Jan. 13, 2024 Digital Assets Outlook report, Fidelity said last year that while institutions expected to dive into DeFi for their products, the Fed's rate hikes “didn't happen because they were perceived to be safe.” ” Traditional Fixed Income Products.
DeFi platforms have previously been considered difficult-to-use interfaces and vulnerable to hacking and exploitation – which has led institutions to “investigate the risks associated with smart contracts”.
“In the current risk-averse environment, institutions have assumed that the risk of trying smart contracts is too low given the mid-single-digit returns generated by DeFi.
However, he said 2024 could see institutions have “new demand” for DeFi products “again if they become more attractive than TradFi products and a more developed infrastructure emerges.”
Today's #Bitcoin ETF approvals along with the rapid growth of real-world assets (RWAs) in DeFi, and the increasing demand for decentralized applications in a scalable infrastructure show an interesting trend this cycle.
It's clear the institutions aren't just warming up… https://t.co/17HpIW97wF
— SaucerSwap Labs (@SaucerSwapLabs) January 11, 2024
Fidelity expects corporations to be “more comfortable with the idea of putting digital assets on their balance sheets” after revised rules from the US Financial Accounting Standards Board (FASB) require companies to report paper losses and gains from their crypto holdings.
Institutions to explore stable coins
In its segment on stablecoins, Fidelity predicted that institutional dollar-denominated assets would be the “biggest potential driver” of adoption this year.
For purposes such as settlement, TradFi said that companies exploring the use of stablecoins could bring “legitimacy” to them, and that they expect “payments, funds and international trade” to be the three main sectors when users look for fast and cheap payments. Methods.
Related: 2024's crypto business trends include bundles, corporate needs and Bitcoin-bound solutions
He added that “regulatory frameworks could become clearer and more certain” and predicted that Tether (USDT) and USD Coin (USDC) will not lose any ground in 2024.
“This market is expected to continue to grow in 2024.” Fidelity wrote. Expected Federal Reserve interest rate cuts could be higher.
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