How DeFi solves the problem of complex settlement risk in securities finance

Last week, a Federal Reserve Bank of New York blog post highlighted the results of a Treasury Management Practices Group working paper that showed the four different ways that US Treasury repo could be settled, and gave a shout out to the US Securities and Exchange Commission’s proposal for centralized US Treasury (UST) repo clearing. In this article, we show how Decentralized Finance (DeFi) solves the problem of settlement risk complexity at a much lower cost to market participants than the CCP model, with its embedded insurance to protect against market instability.
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