Asset management giant Fidelity, in its latest report, predicts that expected Federal Reserve rate cuts could increase institutional interest in decentralized finance (DeFi) and stablecoins, provided the infrastructure develops accordingly.
The report, titled “The Future of Digital Assets in 2024,” notes that despite institutions initially turning to DeFi for yields last year, Federal Reserve rate hikes led them to traditional fixed-income products perceived as safer. DeFi platforms are seen as having difficult interfaces and being prone to attacks, which has kept institutions at bay.
However, Fidelity expects institutional interest in DeFi to revive in 2024 if DeFi yields become more attractive than traditional finance (TradFi) and if the infrastructure improves.
Fidelity also mentions that updated rules by the Financial Accounting Standards Board (FASB) allowing companies to report both gains and losses from cryptocurrencies could warm them to the idea of adding digital assets to their balance sheets.
Regarding stablecoins, Fidelity foresees their exploration by institutions as a major catalyst for adoption this year. The report suggests that TradFi companies exploring stablecoin use for purposes like trading could lend credibility and boost usage in payments, money transfers, and international trade. Regulatory frameworks are expected to clarify, potentially benefiting stablecoins like Tether (USDT) and USD Coin (USDC) in 2024, with the stablecoin market continuing to attract attention and possibly exceeding expectations if the Fed begins rate cuts.
