“The inability to identify users, access credit scores and perform AML/KYC requirements creates regulatory headwinds and limits use cases to trading platforms and overcollateralized lending products, which also creates headwinds for mainstream adoption,” analysts Alkesh Shah and Andrew Moss wrote.
“DeFi applications require development to produce a differentiated product and positive user experience, which drives adoption and usage,” the report said, adding that “increasing adoption and usage result in increasing revenues and native token appreciation if properly designed, both of which can be reinvested in development.”
Bank of America says the majority of DeFi applications are immature, “but we remain in the early stages of a major change in applications that may take place over the next 30 years.” In the longer term, the bank expects the development of DeFi applications with real-world functionality to increase the efficiency of traditional financial products and services, and it anticipates that these applications will evolve by “optimizing the tradeoffs between user incentives and risks.”