According to Fidelity's Digital Assets 2024 report, an interest rate cut by the US Federal Reserve (#Fed) could spur renewed institutional investor interest in DeFi and stablecoins.
This is especially true if the infrastructure supporting these systems continues to evolve.
In the past, the complexity of DeFi interfaces and the associated risks of hacks and exploits have made institutions cautious about adopting #smart contracts. However, 2024 could see a resurgence of interest in the DeFi sector if it proves more attractive than traditional financial products and if the infrastructure becomes more sophisticated.
#Fidelity also suggests that corporations may be more comfortable with the idea of including digital assets on their balance sheets following changes to US Financial Accounting Standards Board rules.
As for #stablecoins, Fidelity predicts that institutional research on US dollar-linked assets could be a significant driver of adoption in 2024. Traditional financial institutions exploring the use of stablecoins for settlement could lend them additional legitimacy. Stablecoins are expected to be heavily utilized in sectors such as payments, remittances, and international trade.
Fidelity also expects the legal framework surrounding stable coins to become clearer, providing greater certainty for assets such as #Tether (USDT) and #USD Coin (USDC), which are expected to maintain their positions in 2024.
Lower interest rates set by the Federal Reserve could potentially lead to an increase in institutional investment in DeFi and stable coins. Lower rates will make traditional financial instruments less attractive compared to innovative digital assets that offer higher returns.
The Fidelity report also highlights the growing acceptance of stablecoins as a means of facilitating faster and cheaper transactions. This is especially true for international payments and money transfers, where traditional financial systems often involve high fees and long processing times. Notably, Americans have recently switched from #Vanguard to Fidelity to buy bitcoin ETF funds.
Improved regulatory frameworks related to stable coins and DeFi are expected to increase investor and institutional confidence in these digital assets. This, in turn, may encourage greater investment and integration of these technologies into broader financial systems.
