DeFi

Product and risk breakdown

July 28, 2021
Essentials

Wondering about the risks involved? We’ll need to use some technical terms to explain, so we recommended checking out how we use digital assets for background information.

Product overview

Money deposited is converted to stablecoin and lent out to institutional borrowers.

What are the risks?

Exchange rate (FX)

Funds are held in stablecoin tracking USD. There is currently no exchange rate mitigation so you will be exposed to movements between USD/AUD.

Depegging

The stablecoin we use is backed by cash and short-dated U.S. government obligations: even with this backing depegging can still occur.

Market volatility

Stablecoins can be affected by change in global market conditions.

Digital attack

It’s possible that someone could exploit vulnerability in the code of a stablecoin.

Custodial

We use third party providers to secure our systems and processes (including Fireblocks as a custodial partner).

Counterparty

Even though borrowers provide collateral to access funds, there’s a chance they may not be able to repay the loan.

Technology

Internally we could have issues with our infrastructure that may prevent access to your balance.

Taxation

Using stablecoins raises taxation issues and you should prepare to discuss this with a qualified professional.

Regulatory

The classification of stablecoins is unclear in many countries and it’s difficult to predict how regulatory bodies will react to new technology.

The future in your hands

Digital dollars are becoming an increasingly common alternative to traditional fiat currencies. If you’re interested explore more of our content (or join the waitlist below).