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Despite Rocky 2022, DeFi has High Hopes for 2023
The year 2022 was by every definition a rough one for crypto, as we’ve discussed at length, but there’s good reason for optimism in 2023. At Cointelegraph, they’re seeing positives being teed up that could mean good outcomes for an industry that’s been beleaguered for too long.
Despite the bloodshed, the DeFi industry has quietly kept building and innovating. 2022 was also marked by several institutional DeFi headlines that could yield benefits over the coming years.
While market sentiment has not been positive, there have been a huge number of positive developments within DeFi, so what does 2023 hold for DeFi?
The failure of several prominent centralized exchanges and platforms in 2022 has already helped shift volumes to DeFi platforms. However, DeFi is still largely reliant on centralized platforms to onboard new users and convert fiat to cryptocurrencies and vice versa. This trend is being challenged and could change in 2023.
As more users choose DeFi over centralized financial solutions, on-ramping infrastructure into the crypto world should improve. Wallets will have on-ramp plugins like MoonPay and Ramp that will connect to users’ credit cards, Apple Pay or bank accounts to convert fiat to cryptocurrencies and vice versa.
Another key on-ramp feature that has emerged is wallets that do not need users to manage private keys. As user experience starts taking center stage, DeFi solutions could see more first-time users.
While counter-intuitive to the ethos of what Web3 stands for, central banks will start creating regulations and legislation for consumer protection. If United States regulators crack the 90-year-old Howie Test whip and deem most cryptocurrencies as securities, that will most certainly affect this space in the short-to-medium term.
Institutional interest in DeFi has picked up over the last year. Payments, custody and AML solutions have particularly seen interest from large banks and financial institutions.
Financial services firms such as BlackRock and Citigroup invested over $1 billion each in DeFi platforms through 2022. As these firms see more institutional clients interested in the crypto asset class, they will be compelled to create offerings to support their clients.
On-chain banking would be the next phase of digital banking where transaction finality and reconciliation would be instantaneous, giving rise to new business models and financial products. 2023 would see key steps in this direction.
In summary, DeFi is poised to mature and stabilize through 2023. Any new technology has its ups and downs. Having seen a strong bullish phase and a grueling bearish slump, the time is ripe for stable growth based on wisdom gained through the experiences of 2022.