Template-Type: ReDIF-Paper 1.0
Author-Name: Sirio Aramonte
Author-X-Name-First: Sirio
Author-X-Name-Last: Aramonte
Author-Name: Sebastian Doerr
Author-X-Name-First: Sebastian
Author-X-Name-Last: Doerr
Author-Name: Wenqian Huang
Author-X-Name-First: Wenqian
Author-X-Name-Last: Huang
Author-Name: Andreas Schrimpf
Author-X-Name-First: Andreas
Author-X-Name-Last: Schrimpf
Title: DeFi lending: intermediation without information?
Abstract: Lending platforms are a key part of the decentralised finance (DeFi) ecosystem, but their institutional features mostly facilitate speculation in cryptoassets rather than real economy lending.
Due to the anonymity of borrowers, overcollateralisation is pervasive in DeFi lending, which generates procyclicality. Reliance on collateral also limits access to credit to borrowers who are already asset-rich, negating financial inclusion benefits.
For DeFi lending to make inroads into the real economy, it needs to tokenise real assets and rely less on collateral by developing its ability to gather information about borrowers; as such, the system is likely to gravitate towards greater centralisation.
Length: 9 pages
Creation-Date: 2022-06-14
File-URL: https://www.bis.org/publ/bisbull57.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/bisbull57.htm
File-Format: text/html
Number: 57
Handle: RePEc:bis:bisblt:57