Credit Facility

Definition ∞ A credit facility is a type of lending arrangement that permits a borrower to draw funds up to a predetermined maximum amount over a specified period. In digital asset markets, this can involve collateralized loans where cryptocurrency holdings secure a line of credit. Such facilities provide liquidity to users without requiring them to sell their underlying digital assets. They offer financial flexibility for asset holders.
Context ∞ Decentralized finance platforms are actively developing and offering various credit facilities, frequently leveraging smart contracts for automated execution and management. News articles often discuss the risks and rewards associated with these offerings, including collateralization ratios and liquidation mechanisms. The expansion of digital asset credit facilities represents a significant step in the maturation of the crypto financial system.