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Chainlink co-founder Sergey Nazarov believes that 2022 will see increased institutional adoption of decentralized finance (DeFi).
Speaking with Solana co-founder Anatoly Yakovenko during a virtual fireside chat at the Solana Breakpoint conference in Lisbon, Portugal, Nazarov said that he expects, "a number of enterprises and banks and various existing players to now want to lose their relationship with customers and users and key institutional clients."
Specifically, Nazarov said, he envisions that institutional DeFi growth will come via banks and the burgeoning NFT market.
“I expect a number of things to go live around DeFi returns through your bank, or buying NFTs through an existing marketplace, or some existing universe of Web 2.0 tools,” he added.
What’s more, Nazarov predicted there will be “a flow of various collateral on-chain,” meaning new markets for insurance products on-chain.
“I think the world is going to eventually—probably in 2022—realize that there’s this big market called DeFi,” he also said.
The growth behind DeFi
Nazarov may believe 2022 will be the year of institutional DeFi, but the DeFi industry has already come on in leaps and bounds during 2021.
According to DeFi Pulse, there is a total of $113 billion total value locked (TVL) in today’s DeFi industry, up from $26 billion at the start of the year.
Part of that huge increase in TVL, Nazarov said, can be credited to PayPal, which made headlines earlier this year when it announced that customers could now buy and sell crypto on the platform.
“If PayPal has done its research and decided to allow this type of Web 2.0 interaction with crypto, why on earth do you think your users won’t come to you and also want to interact with custody, and DeFi, and so on,” he added.
DeFi and regulation
The DeFi future might look bright, according to Nazarov, but there are still plenty of regulatory hurdles in the way. With its meteoric growth in the last year has come increased attention from regulators.
Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), is one of those who has repeatedly banged the drum for closer regulatory oversight of the DeFi industry, arguing that DeFi platforms could be playing host to unregistered securities. Just last month, Gensler said that DeFi “will end poorly” without the requisite protections put in place.