Repo Markets

Definition ∞ Repo markets are financial markets where participants borrow or lend funds by selling and subsequently repurchasing securities. These repurchase agreements, or repos, are short-term loans collateralized by high-quality assets. They serve as a crucial source of liquidity for financial institutions.
Context ∞ The emergence of tokenized assets and decentralized finance has led to discussions about the potential for crypto-native repo markets. These digital asset repo markets could provide liquidity for stablecoins and other digital collateral, mirroring traditional financial operations. A key challenge involves establishing robust legal frameworks and reliable on-chain infrastructure to manage collateral, defaults, and settlement in a decentralized context.