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Will DeFi eventually turn into a stock market?

For decades, the stock market ecosystem was the only alternative to earn capital for companies. But as the DeFi platform gains traction, the need to use the stock market to find investors may disappear.

Also, after more than a decade since Bitcoin’s creation, other cryptocurrencies have failed to fulfill the dream of a new, widely-used global currency that is free from central bank manipulation. Consequently, the emerging movement of DeFi has the potential to shake the very foundations of central banking and financial regulation that have characterized the US financial system for over a century.

“Let’s be clear here. DeFi won’t replace the current stock market ecosystem completely. In fact, it doesn’t need to. It’s more likely that people will force the market to evolve if it wants to remain competitive.”

The US SEC on Stablecoins

Just today, there was a report that US Securities Exchange Commission (SEC) could gain authority over Stablecoins. With the pending regulations, stablecoins might be subject to some of the same rules as bank deposits.

In addition, Bloomberg reported that the US Treasury and other government agencies will soon publish a report giving the SEC more control over stablecoins. Since SEC mainly focused on regulating cryptocurrency projects that promise returns by selling tokens, especially those that run ICOs or similar sales, could this be the start for DeFi to eventually be the new stock market?

There is no doubt that the stablecoin market has grown significantly in 2021. Not to mention, the leading stablecoin Tether (USDT) has grown rapidly this year, with its market capitalization increasing by 229% since the start of the year to $69.5 billion.

Tether (USDT) Market Cap 2016–2021 | Source: Coingecko

DeFi: The path forward

With the development of decentralized exchanges, I realized there is potential for decentralized services and the ability to reimagine banking. A major disruption to the financial world has already happened thanks to DeFi. Eventually, this will turn into a stock market — especially since the stock market was ‘only for elite’ before.

Now, no matter who you are, what you do, where you came from, DeFi includes ‘you’.

DeFi is a democratic, inclusive, and open environment. An entrepreneur who is passionate about their company or project can raise funds quickly and efficiently. Those who are interested in investing in future breakthrough technologies do not need permission to do so. No hassle, no barriers.

As the whole decentralized finance continues to take flight, and tokens become more common, you’ll see governments fight to maintain their control. For example, the US SEC was quick to call out any risk of fraud and manipulation. However, they will turn a blind eye to the obvious manipulation that runs rampant on the stock market.

Check out our related article: The Coming of DeFi 2.0

Conclusion

Decentralized finance is not just a technological breakthrough. We are witnessing a paradigm shift. In the world of blockchain and DeFi, anyone can get involved. With widespread innovation, the financial system will finally be able to help anyone prosper financially. No one will be left behind.

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ALPEX

ALPEX

ALPEX is a cutting-edge digital asset and derivatives trading platform, created to provide the world’s best and most secure online trading experience.

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