Bernstein predicted in an analysis report that the financial industry’s future would not need banks. While banks continue to exist, they will primarily function as “old wealth custodians,” operating in the background.
According to analysts Manas Agrawal and Gautam Chugnai, the financial services revolution and generating new wealth will shift to a modern financial application universe built on the ETH ecosystem. The report also states a resurgence of interest in decentralized finance (DeFi) which is more durable, adaptable, and transparent, with better token economics.
Bernstein’s projections indicate that the bank-free DeFi system will generate revenue of $40 billion annually, and its total assets will increase to 1 trillion dollars from its current $66 billion by 2028. The firm predicts that DeFi will see massive asset growth, with $5 trillion added over the next ten years, thanks to its rapid adoption.
According to the note, the forthcoming generation of DeFi will be established on a scalable layer-2 protocol, with transaction costs declining by 95%. Additionally, it will feature products that offer sustainable yields and genuine income instead of relying on token rewards.
Layer 2 pertains to autonomous blockchains constructed above layer-1 networks that mitigate scaling and data issues. Layer 1, contrarily, denotes a blockchain’s foundational layer or its underlying framework.
SEC’s Crypto Regulatory Enforcement Do Not Pose A Real Threat – Bernstein
According to the report, a few individuals within the industry voiced apprehension about cryptocurrency being deliberately excluded from the banking system through the targeting of custody and stablecoins regulations. According to the analysis report by Bernstein, the regulatory measures taken against the stablecoin BUSD and its issuer Paxos were targeted solely at them.
The report also noted that some individuals in the crypto industry were worried about the attack on stablecoins and custody regulations. Hence, such attacks could potentially result in cryptocurrency being phased out of the US banking system.
The proposed change to custody rules, currently under review, would benefit bank stewards and provide a favorable outlook for cryptocurrency custodians like Anchorage Digital, who own bank charters. Analysts Manas Agrawal and Gautam Chhugani also noted that this proposal would benefit custodians operating underneath state charters.