Speaking at The Block’s  Developing a Digital Asset Strategy panel, Andrew Peel, the head of digital assets at multinational investment bank Morgan Stanley said he is aware of the explosion of DeFi.

DeFi will retain its momentum next year

“I would say an evolution of this current momentum in terms of significant interest in the topic will continue through 2021,” he said.

He added that the evolving technology has the potential to be used in more traditional and regulated ways in the next two years.

“I think some of the technology from this DeFi phase will certainly be utilized in some more regulated way throughout 2021 towards 2022.”

He sees programmable features of the technology as a vehicle for rethinking the digital financial infrastructure.

Peel was appointed as the head of digital asset markets by Morgan Stanley in 2018. Prior to Morgan Stanley, he spent 12 years at Credit Suisse where he was Vice President of Derivatives Trading and the subject matter expert for bitcoin and cryptocurrencies.

Morgan Stanley has not been as critical against cryptocurrencies as other banks. 

A closer look at DeFi

The meteoric rise of DeFi has been one of the major talking points of the crypto industry in 2020. A metric known as total value locked (TVL) in DeFi, which refers to the amount of money in dollars locked in DeFi projects, is the new defacto method for measuring the growth of the sector.

According to DeFi Pulse, a service that tracks the TVL in the sector, there is now $16.27 billion locked in DeFi projects. 

To put the exponential growth into perspective, the total value locked in DeFi on January 1, 2020, was $675 million. In less than a year, the sector has grown 2,310%.

[caption id="attachment_20290" align="aligncenter" width="907"] Total Value Locked in DeFi (USD) has grown more than 2,300% year-to-date (YTD) | Credit / DeFi Pulse[/caption]

However, the astronomical rise of DeFi has not been without controversy and criminal activities. A report published by crypto intelligence firm CipherTrace showed that losses from cryptocurrency thefts, fraud, and hacks decreased in 2020. 

The first 10 months of the year saw $1.8 billion lost in the industry. In 2019, criminals netted $4.9 billion from crypto crimes.

However, the growth of the sector has led to a rise in DeFi hacks and exit scams. From January to October this year, $98 million, or roughly 20% of the cryptocurrency hacks came from DeFi platforms.

Less than 2 days ago, DeFi protocol Warp Finance lost $7.7 million in Dai and USDC stablecoins in a flash loan attack.