The Arcade Decentralized Finance (DeFi) protocol has witnessed the first on-chain loan backed by a claim from now-bankrupt crypto exchange FTX. A creditor of FTX has pledged a receivable as collateral for a loan, marking a significant development in the world of decentralized finance.
According to bankruptcy filing platform Found, the $31,307 claim was tokenized and represented by a non-fungible token (NFT). The NFT was then used as collateral for a $7,500 loan on June 23, with a repayment deadline of five days. In the event of late payment, the lender has the right to claim the FTX asset.
This transaction exemplifies the tokenization of real-world assets (RWA), where a token represents ownership of an asset on a blockchain. Asset tokenization is a crucial aspect of DeFi, as it enables a wide range of real-world assets to be tokenized, including stocks, government bonds, real estate, and commodities.
Found highlighted that both the original creditor and the lender underwent Know Your Customer (KYC) and Anti-Money Laundering (AML) biometric verifications. The company’s website states that users can access loans with bankruptcy claims as collateral, subject to a 10% transaction fee on successful transactions.
FTX filed for bankruptcy in November 2022, resulting in the freezing of billions of dollars in users’ accounts pending court cases. It is estimated that FTX claim holders may recover between 35% and 66% of their face value.
The rise in cryptocurrency-related bankruptcy cases, many of which are linked to the collapse of FTX, has led to an increase in on-chain claims resolution. Found, a bankruptcy filing platform, was launched earlier this year to address this growing demand. Additionally, the co-founders of the collapsed hedge fund Three Arrows Capital (3AC) launched the claims trading platform Open Exchange in April.
The utilization of blockchain technology and decentralized finance in resolving bankruptcy claims is a significant development in the financial industry. It showcases the potential of tokenization and the role it can play in transforming traditional financial systems.
What role does Know Your Customer (KYC) and Anti-Money Laundering (AML) verification play in ensuring compliance and security in the tokenization of bankruptcy claims
The world of decentralized finance (DeFi) has achieved a major milestone with the Arcade Decentralized Finance protocol witnessing its first on-chain loan backed by a claim from now-bankrupt crypto exchange FTX. In this groundbreaking transaction, a creditor of FTX pledged a receivable as collateral for a loan, demonstrating the potential of tokenization in the world of DeFi.
According to bankruptcy filing platform Found, the $31,307 claim was tokenized and represented by a non-fungible token (NFT), which was then used as collateral for a $7,500 loan on June 23. The lender has the right to claim the FTX asset in the event of late payment. This development highlights the tokenization of real-world assets (RWA) on a blockchain, including stocks, government bonds, real estate, and commodities.
Both the original creditor and the lender went through Know Your Customer (KYC) and Anti-Money Laundering (AML) biometric verifications, ensuring compliance and security. Found’s website offers users the opportunity to access loans with bankruptcy claims as collateral, subject to a 10% transaction fee.
FTX filed for bankruptcy in November 2022, leading to the freezing of billions of dollars in users’ accounts pending court cases. It is expected that FTX claim holders may recover a percentage of their face value, ranging from 35% to 66%.
The surge in cryptocurrency-related bankruptcy cases, particularly those connected to the collapse of FTX, has fueled the demand for on-chain claims resolution. This has prompted the launch of bankruptcy filing platforms like Found and claims trading platforms such as Open Exchange by the co-founders of the collapsed hedge fund Three Arrows Capital (3AC).
The utilization of blockchain technology and DeFi in resolving bankruptcy claims represents a significant advancement in the financial industry. It demonstrates the transformative potential of tokenization and its ability to reshape traditional financial systems.
Wow, utilizing on-chain loans in DeFi protocols is a game-changer for FTX. It’s impressive to see creditors pledging their receivables as collateral, demonstrating the growing trust and adoption of blockchain technology in the financial industry. Exciting times ahead!