invezz.com
Decentralised finance (DeFi) is the current buzzword for various reasons. In response to investors’ increased interest in DeFi, S&P Global Ratings, a unit of S&P Global (SPGI), a renowned American credit ratings agency, established a DeFi strategy group to strengthen the company’s position in the decentralised market.
S&P Global Ratings acknowledges that DeFi is gradually revolutionising the capital markets, from market participants to the formation of new asset classes and the emergence of improved competencies to execute financial transactions.
Elizabeth Mann, the chief financial officer of S&P Global Ratings, believes that DeFi has the potential to disrupt financial markets in ways not seen since the early days of fintech and e-commerce.
As a result, the global behemoth intends to capitalise on the rising velocity of blockchain and DeFi to disrupt the incumbent primary and secondary debt capital markets and provide new possibilities for credit market participants.
The global behemoth intends to enhance S&P’s analytical and risk assessment skills for traditional finance and DeFi clients through the newly created division. This endeavour will be led by Charles Chuck Mounts, who will serve as Chief DeFi Officer at S&P Global Ratings, and Charles Jansen, the Head of DeFi Transformation.
How DeFi can contribute to debt capital markets?
DeFi has several possible uses, particularly in the debt capital markets. This space focuses primarily on prospects for long-term investments, including debt securities and other financial instruments.
Hence, as assets are transferred between those in need of capital and those with surplus wealth, blockchain, topped with DeFi, may play a pivotal role in easing coordination between various parties by recording and maintaining a single, irreversible ledger of transactions.
This arrangement will be a practical addition to several capital markets use cases, including asset ownership and control, interoperability, governance and compliance, trading exposure, and clearing, faster than the existing arrangement.
Furthermore, DeFi will make it easier for new investors to enter the market and provide retail investors with simple access to private market investing opportunities.
Is DeFi the answer to the existing discrepancies in the debt capital market?
If we compress all the difficulties in the financial markets, they may boil down to one thing- inefficiency resulting from a lack of confidence in isolated processes.
These inefficiencies create an entrance hurdle for investors and add to the duplication of work for capital markets businesses.
Through digital signatures, DeFi provides a straightforward answer. Users can easily establish their identity and gain authorisation only once. This authorisation can be used as proof of a user’s credentials for all future communications. Even better, this procedure safeguards personally identifiable information, sharing just the bare minimum with the authorised parties.
Indeed, DeFi will be the norm in the future.