Credit Extension

Definition ∞ Credit extension involves a lender providing funds or resources to a borrower, who agrees to repay the amount, typically with interest, over a specified period. This financial operation enables individuals and entities to acquire capital beyond their immediate liquid assets. It forms a fundamental component of economic activity.
Context ∞ In the digital asset sphere, credit extension is a rapidly expanding area within decentralized finance (DeFi), where protocols facilitate lending and borrowing using cryptocurrencies as collateral. News often reports on the growth of DeFi lending platforms and the innovations in credit scoring for on-chain identities. The regulatory landscape for digital asset credit extension remains a key discussion point, influencing its broader adoption and risk management practices.