{"id":59105,"date":"2022-03-23T10:03:58","date_gmt":"2022-03-23T08:03:58","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=59105"},"modified":"2025-09-04T20:09:56","modified_gmt":"2025-09-04T17:09:56","slug":"morgan-stanley-flags-obstacles-to-continued-explosive-growth-of-defi","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/morgan-stanley-flags-obstacles-to-continued-explosive-growth-of-defi\/","title":{"rendered":"Morgan Stanley flags obstacles to continued explosive growth of DeFi"},"content":{"rendered":"<p>Over-collateralization and regulation will prove to be constraints on the continued exponential growth of the DeFi sector in the coming years. Morgan Staley analysts reached these conclusions, writes <a href=\\\"https:\/\/www.coindesk.com\/business\/2022\/03\/22\/morgan-stanley-sees-defi-remaining-fairly-small-as-growth-to-slow\/\\\">CoinDesk<\/a>.<\/p>\n<p>The investment bank&#8217;s analysts noted that they did not find much evidence to support the thesis that DeFi protocols significantly improve the traditional financial system.<\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p><em>\u201cThe projects look like a means of siphoning cash flows to enrich their operators. DeFi is prone to hacking and the risk of financial crime, as its hallmark is anonymity,\u201d<\/em> they wrote.<\/p>\n<\/blockquote>\n<p>The absence of <span data-descr=\\\"know your customer\\\" class=\\\"old_tooltip\\\">KYC<\/span>\/<span data-descr=\\\"anti-money laundering\\\" class=\\\"old_tooltip\\\">AML<\/span> requirements will limit adoption among institutional players, and the integration of these requirements would make DeFi more centralized, the analysts explained.<\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p><em>\u201cOver-collateralization in lending\/borrowing does not increase the money supply. Without centralization DeFi will be harder to regard as an alternative to the current fractional-reserve banking approach,\u201d<\/em> \u2014 the analysts stressed.<\/p>\n<\/blockquote>\n<p>Morgan Stanley forecast stronger oversight of the sector after regulators&#8217; &#8216;slower&#8217; response to the boom in this segment.<\/p>\n<p>In August 2021, SEC Chairman Gary Gensler warned of <a href=\"https:\/\/forklog.com\/en\/news\/gensler-warns-of-tighter-regulation-for-defi-and-stablecoins\">an intensification of DeFi regulation<\/a>. He later stressed that the decentralized nature of projects <a href=\"https:\/\/forklog.com\/en\/news\/gensler-defi-decentralisation-does-not-immunise-against-sec-oversight\">does not provide immunity<\/a> from the agency&#8217;s oversight.<\/p>\n<p>Subsequently the regulator drafted amendments to the Securities Act affecting the regulation of automated trading systems (ATS). SEC Commissioner Hester Peirce <a href=\"https:\/\/forklog.com\/en\/news\/hester-peirce-flags-threat-to-defi-platforms-in-securities-act-amendments\">stated<\/a> that they may threaten the operation of DeFi platforms.<\/p>\n<p>Earlier the Bank for International Settlements <a href=\"https:\/\/forklog.com\/en\/news\/bis-says-the-decentralisation-of-defi-protocols-is-an-illusion\">called<\/a> the decentralization of DeFi protocols an illusion. Experts expressed confidence that there will be cases where projects will require reorganization or valuation.<\/p>\n<p>Subscribe to ForkLog news on Telegram: <a href=\\\"https:\/\/t.me\/forklogfeed\\\" target=\\\"_blank\\\" rel=\\\"nofollow noopener\\\">ForkLog Feed<\/a> \u2014 the full news feed, <a href=\\\"https:\/\/telegram.me\/forklog\\\" target=\\\"_blank\\\" rel=\\\"nofollow noopener\\\">ForkLog<\/a> \u2014 the most important news, infographics and opinions<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over-collateralization and regulation will act as constraints on the continued exponential growth of the DeFi sector in the coming years. Analysts at Morgan Staley reached this conclusion, as CoinDesk reports.<\/p>\n","protected":false},"author":1,"featured_media":59106,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[1093,873,1138],"class_list":["post-59105","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-defi","tag-morgan-stanley","tag-opinions"],"aioseo_notices":[],"amp_enabled":true,"views":"14","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/59105","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=59105"}],"version-history":[{"count":1,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/59105\/revisions"}],"predecessor-version":[{"id":59107,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/59105\/revisions\/59107"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/59106"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=59105"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=59105"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=59105"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}