Double liquidity counting refers to an erroneous accounting practice where the same underlying liquidity is recorded multiple times within a financial system. This overstatement can occur when assets are rehypothecated or used as collateral across different platforms without proper reconciliation. It leads to an inflated perception of available capital. Such inaccuracies can obscure true risk exposures.
Context
Double liquidity counting becomes a significant concern during periods of market stress or when assessing the stability of interconnected decentralized finance protocols. News analyses frequently highlight this issue as a potential source of systemic risk within the digital asset ecosystem. Regulators and protocol developers are actively working to implement clearer standards for liquidity reporting to prevent such misrepresentations.
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