Secured lending involves extending credit where the borrower pledges an asset as collateral to the lender. If the borrower defaults, the lender can seize and sell the collateral to recover the outstanding loan amount. In the digital asset context, this often means using cryptocurrencies like Bitcoin or Ethereum as security for a loan. This practice mitigates risk for lenders and typically results in more favorable interest rates for borrowers.
Context
Secured lending is a frequently discussed topic in crypto news, reflecting its growing role in both centralized and decentralized finance. Reports often cover the mechanics of crypto collateralization, including overcollateralization requirements and liquidation protocols. The regulatory treatment of secured lending with digital assets is a key area of ongoing development and debate. This financial instrument provides essential liquidity options for digital asset holders.
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