Ripple’s President Predicts DeFi Compliance Dominance in 2024
[TL; DR]
The DeFi sector will grow if crypto firms strengthen their regulatory compliance.
The United States has redefined the definitions of “dealer” and “government securities dealer” to gain greater oversight on the cryptocurrency sector.
The average revenue per user in the DeFi market will likely reach $1,378 in 2024.
Introduction
Ripple President has shed light on the legal developments in 2024 and the prospect of DeFi compliance to existing and emerging crypto regulations. This comes after many governments worldwide have recognized the need to establish and enforce clear crypto regulations to promote innovation and protect citizens from illicit cryptocurrency activities.
In this analysis, we delve on Monica Long, Ripple‘s president’s prediction on key developments in the cryptocurrency sector in 2024. We will also examine the recent change in the United States crypto legislation.
The Rapid Growth and Evolution of the DeFi Sector
In 2024 Ripple’s major focus is on compliance with various legal provisions that apply to the DeFi sector. In fact, Monica Long, Ripple’s president, thinks that DeFi compliance dominance will become one of the crypto trends in 2024 which will help to build investor trust and attract governments’ support.
Legal compliance is very crucial during this period after many well-established crypto projects like TerraUSD and FTX exchange collapsed during the last two years. The other disturbing thing has been the high number of bankruptcy cases like that of Celsius, BlockFi and Voyager that occurred in 2023.
The various bankruptcy cases and crypto project implosions created uncertainty in the DeFi sector. Investor confidence was further dampened by rampant crypto crackdowns in the United States. Therefore, to restore sanity and confidence in the sector Long has called for regulatory compliance.
More importantly, Long said that Ripple aims to develop innovative technologies that comply with regulatory standards to protect investors and to foster the stability of the crypto industry.
Also, Long believes that by following regulations the DeFi sector will become more connected with the traditional financial industry which will spur its growth. “In 2024, crypto will break the speculative hype cycles that have defined the booms and busts for the industry since Bitcoin’s invention. The biggest breakthrough in 2024 will be pioneering compliance for decentralized finance,” Long said.
She added, “The way forward is a happy marriage, and that’s what we’ve always believed. You cannot transform how society moves, manages, tokenizes and stores value if you don’t understand the foundations and history of the problem.”
Real-world Utility and Growth of DeFi
In an interview with Cointelegraph Long maintains that real-world utility of DeFi will drive its adoption and growth in the near future. This is because the phase of hype and speculations that have been fuelled by initial coin offerings and non-fungible tokens is coming to an end.
The new DeFi thrust hinges not only on regulatory compliance but also integration with existing s such TradFi and artificial intelligence. Already, analysts believe that DeFi will experience visible growth in 2024. According to CoinGecko the DeFi sector has a market capitalization of over $79.5 billion.
Such an astronomical DeFi growth within a period of less than two decades has attracted the attention of regulators, enticing them to call for the crypto market regulation.
There are several factors that may drive DeFi growth in 2024 and beyond. First off, the increase in access to decentralized financial services is vital for the growth of the sector. This is because DeFi services are more transparent, inclusive and accessible than traditional financial services.
As an example, decentralized lending, trading and borrowing are more accessible in DeFi than in the traditional financial sector. Notably, both Decentralized exchange platforms and centralized crypto protocols offer such products. In addition, the development of new applications and use cases will further enhance the growth of the sector.
With the current developments, Statista predicts that revenue from DeFi may exceed an annual growth rate of 9.07% between 2024 and 2028 leading to “a projected total amount of US$37,040.0 m by 2028.”
At the same time, the DeFi market may attain an average revenue per user of US$1,378.0 in 2024. Much of this revenue will come from decentralized exchanges (DEXs) that allow users to trade crypto assets without intermediaries or central authority. Similarly, the number of DeFi users may increase to 22.09 m by 2028.
SEC Redefines Dealer Terms, Maintaining Expanded Registration in the United States
The SEC aims to find a way of bringing the DeFi sector under its regulatory oversight through expanding the definitions of “dealer” and “government securities dealer.” The new definition of dealer will expand its application to the cryptocurrency sector.
The rules, the SEC adopted on 6 February, will require market participants to register with it and comply with federal securities laws and market regulations. In addition, the SEC will require each market participant to become a member of a self-regulatory organization.
Basically, the dealers perform important market functions such as providing liquidity to buyers and sellers as well as absorbing order imbalances. According to a recent government statement a dealer is defined as “any person engaged in the business of buying or selling securities for their own account.”
It further clarifies that, “dealers provide the service of immediate trading… the provision of liquidity, including acting as a “market maker” or “a de facto market maker.”
Commissioner Caroline Crenshaw explained the importance of the new rules. She said, “There is a clear loophole here: market participants with a significant share of market volume are engaging in activities like those performed by dealers, without being registered as dealers.”
“The rules we are considering today would help close this regulatory loophole and level the playing field by subjecting market participants that perform similar dealer functions to a common regulatory regime,” she added.
Such sentiments from a regulator shows that the expanded definitions of “dealer” and “government securities dealer” will likely apply to the crypto market soon, thereby redefining DeFi trends in 2024.
Conclusion
Monica Long, who is Ripple‘s president, recently said that the DeFi sector should comply with market regulations to register greater success than before. She emphasized that Ripple will do much to abide by existing and emerging laws. In a related move, the United States aims to change the definitions of “dealer” and “government securities dealer” to make them applicable to the crypto sector.
FAQs about DeFi
Are DeFi coins a good investment?
Some of the DeFi coins have the potential to offer better returns on investment than traditional financial assets. Leading cryptocurrencies like Solana, Bitcoin and Ether can give good returns through programs like liquidity provision and staking.
How big is DeFi today?
The DeFi total market capitalization is over $79.5 billion and has the potential to keep rising. However, the DeFi market capitalization at any point depends on the performance of the various tokens and coins.
What is considered DeFi?
DeFi, which stands for decentralized finance, is a financial technology based on the blockchain and uses cryptocurrency for peer-to-peer payments. It aims to reduce high transaction fees and payment delays that exist in the traditional financial sector.
What does DeFi stand for?
DeFi stands for decentralized finance where people and institutions use cryptocurrencies to make payments through a peer-to-peer . Currently, there are thousands of virtual currencies for that purpose.
Is DeFi illegal in the United States?
DeFi is legal in the United States although there is a need for crypto firms like exchanges to comply with market regulations in the country. In the US people can acquire, hold and trade cryptocurrencies. They can also use them for making payments although they are not legal tender.
What is the DeFi trend in 2024?
In 2024 most DeFi projects intend to comply with various regulations that exist in different countries. Firms in the industry also aim to partner companies that operate in the traditional financial sector to increase the adoption of crypto assets.
How big is the DeFi market?
The DeFi market has a total market capitalization of over $79.5 billion with the prospect of growing further in 2024. We also expect new DeFi projects to come on the market in 2024 and beyond.
Is there any future in DeFi?
DeFi is the future of the global financial sector if many people and organizations adopt cryptocurrencies. This is because it enables transparent, cost effective and secure payments.
