A new administration in the United States could push for a unified regulation favorable to Ripple and the fintech sector. The XRP ledger will take a place in the DeFi race and receive DeFi capabilities in 2021.
Ripple has published a new blog post highlighting its high expectations for 2021. RippleNet General Manager, Asheesh Birla, believes that the line between the crypto market and the crypto industry with banks will “blur.” He expects digital assets to be able to take a larger share of the market from companies within the legacy financial sector.
Birla added that the entry of companies such as PayPal, Square and Robinhood into the crypto industry has enabled adoption into the mainstream. With this in mind, Ripple’s GM predicts more competition from the fintech sector to the banking sector, driven by “tighter regulation.” This is also reflected in the crypto companies that have begun to apply for banking licenses, such as the company backed by Visa Anchorage. Birla predicted in this regard:
The tide is turning. It’s possible that we could even see a fintech or cryptocurrency company acquire a traditional financial institution this coming year.
However, the regulation of the crypto industry in the United States will continue to be one of the main issues. The payment solutions company is facing a lawsuit from the Securities and Exchange Commission (SEC), the outcome of which could have unexpected consequences for the entire ecosystem.
Yet, the change in the U.S. president’s administration could be a glimmer of hope, bringing a unified regulatory framework and the application of a “streamlined” process for companies like Ripple, according to the company’s general counsel Stu Alderoty. Regulations have left the blockchain industry in a “state of limbo,” and Alderoty believes Biden’s team will be able to understand that maintaining innovation is important for both the public and private sectors. Alderoty stated:
Intelligent, well thought-out regulations communicated effectively and uniformly applied can help level the playing field and unleash innovation and further mainstream adoption here in the U.S.
Rise of the DeFi sector
Ripple’s Head of DeFi, Michael Zochowski, estimates that decentralized finance will have “more traction in 2021.” He also believes the first DeFi protocols will consolidate their positions or be adopted by large enterprises:
But the truly useful ones – most likely the simpler applications replicating financial services like wrapped assets or decentralized exchanges – should continue to gain momentum with users.
As a result, the DeFi sector could see growth in users, in protocols created, and in interoperable “bridges between networks and applications.” Cardano could be one of the biggest competitors in this regard. IOHK is evaluating partnerships with Litecoin and IOTA, while Cardano’s DeFi capabilities emphasize interoperability.
Consequently, Ethereum could lose market share as the leading blockchain in DeFi. Zochowski predicts that Ethereum could lose a significant percentage of Total Value Locked (TVL) in its protocols, which he estimates at 25% by the end of 2021.
The XRP Ledger will also take a place in the DeFi race. With the launch of Flare Networks or even the Hooks amendment, the XRP Ledger will become DeFi-capable. In addition, fungible tokens and the issuance of stablecoins will also see great support from the community, as Zochowski said:
We’re expecting the asset tokenization trend to accelerate on XRPL, particularly stablecoin issuance, with multiple production deployments in corporate products built on new and improved tooling.