Definition ∞ Asset backed finance is a financial method where loans are secured by a pool of underlying assets. This process involves pooling illiquid assets, such as mortgages or auto loans, and converting them into tradable securities. Investors acquire a claim on the cash flows generated by these assets, providing liquidity to the original lenders. The structure helps distribute credit risk among various participants.
Context ∞ In digital asset markets, asset backed finance is gaining traction through tokenization, where real-world assets are represented as digital tokens on a blockchain. This approach aims to bring greater transparency and efficiency to securitization processes. Regulatory frameworks are evolving to accommodate the legal and operational aspects of tokenized asset-backed securities, presenting both opportunities and challenges for market adoption.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
