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Investing.com – DeFi, one of the most impressively growing segments of the cryptocurrency market in recent years, may begin to see its progress slow in the face of several hurdles, including regulatory ones, according to a report from the bank Morgan Stanley (NYSE:).
First of all, remember that DeFi, for “Decentralized Finance”, is a generic term used to refer to loans, exchanges and other financial activities carried out on a blockchain, without the need to resort to traditional intermediaries.
But Morgan Stanley says it hasn’t seen much evidence that DeFi protocols are more efficient than the traditional financial system.
“DeFi protocols appear to us rather as a means of attracting financial flows to enrich the operators of the protocol,” the bank’s report states. “DeFi is susceptible to hacking and poses a financial crime risk given that anonymity is a key feature.”
Morgan Stanley also predicts that lack of know-your-customer (KYC) and anti-money laundering (AML) information will limit adoption by institutions, and that meeting KYC/AML requirements “will force DeFi to be more centralized”.
Indeed, the bank notes that regulators have been slow to catch up with the DeFi boom, due to the lack of a central entity, but believes oversight will intensify soon.
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