Former Morgan Stanley Executive Says Defi Can Learn From Traditional Finance To Lower Risks

Former Morgan Stanley Executive Says Defi Can Learn From Traditional Finance To Lower Risks

During a recent interview, Kevin Lepsoe, CEO of Infinity Exchange, said that if DeFi wants to gain more institutional adoption, it needs to tackle the fixed income markets first.

In a recent development, the decentralized finance ecosystem (DeFi) secured another victory against the traditional finance industry, often referred to as TradFi, after a former Morgan Stanley executive launched a protocol that adheres to DeFi principles.

It is the intention of Kevin Lepsoe, who was the former head of structuring at Morgan Stanley, to deliver an institutional fixed income scheme that will offer fixed and floating rates in his new project Infinity Exchange.

According to Lepsoe, with the launch of the new project, DeFi traders will be able to “implement arbitrage, pull liquidity from other protocols, and hedge their futures rates based on risk.”.

The DeFi market is known for its volatility, which, consequently, entails a higher level of risk in the trading of digital assets.

Former Morgan Stanley Executive Says DeFi Can Learn From Traditional Finance To Lower Risks

In order to hedge risk and speculate along the entire maturity curve, one needs to be able to trade with more options.

With the availability of a greater range of investable assets along the said curve, users will have an easier time moving between risky assets and assets that are risk-free.

As Lepsoe told Cointelegraph, the introduction of a crypto yield curve is important to the growth of DeFi trading because it reduces volatility as a result of introducing a yield curve.

It is this development that will set the stage for institutional investors and traders to continue pouring money into this space for years to come.

There is still a high level of institutional interest in cryptocurrencies, according to a recent survey from Bitstamp.

The majority of institutional investors polled predict that in the next decade, crypto is going to overtake traditional investment forms in terms of popularity.

According to Lepsoe, if the industry hopes to attract more institutional investors in the future, applying mechanics that already work within known markets would be a good place to begin.

As Lepsoe mentioned, “in the trade-finance market, institutional investors are more active in the fixed income markets than they are in the equity markets,” said Lepsoe.

The CEO of DeFi highlighted the fact that institutional adoption will follow if fixed income markets become a thing of the past for the company in the near future.