Deposit disintermediation describes the process where traditional bank deposits are bypassed by alternative financial instruments. In the context of digital assets, this refers to individuals or institutions choosing to hold funds directly in cryptocurrencies, stablecoins, or decentralized finance (DeFi) protocols rather than in conventional bank accounts. This shift can reduce reliance on commercial banks for savings and lending, potentially altering traditional financial intermediation models. It represents a direct interaction with financial services without traditional intermediaries.
Context
The state of deposit disintermediation is a growing concern for traditional financial institutions and regulators, particularly with the rise of high-yield DeFi opportunities. Key debates focus on the systemic risks this trend could pose to fractional reserve banking and monetary policy effectiveness. Future developments include regulatory responses aimed at stablecoins and DeFi platforms, alongside traditional banks innovating to offer competitive digital asset services to retain customer deposits.
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