coindesk.com
Happy Wednesday,
This is your institutional newsletter, Crypto Long & Short. This week:
- Mike Hathaway and Joseph Quintilian of Ajna on the question every DeFi lender should ask before depositing
- Top headlines institutions should pay attention to by Francisco Rodrigues
- “$SOL has fallen in step with Solana’s memecoin trading” in Chart of the Week
On this Veterans Day and Remembrance Day we would also like to take the opportunity to thank all who have served.Thanks for joining us!
- Kim Klemballa
DeFi lending needs rules a governance vote can’t change
- by Mike Hathaway and Joseph Quintilian, co-founders, Ajna
Recently, the Federal Reserve proposed two new rules to implement under the GENIUS Act, crypto’s flagship regulatory framework. These rules require stablecoin issuers to back tokens with reserve assets and enforce new capital and risk-management standards.
The proposal specifies that redemptions must be honored within two business days, and issuers must report outstanding stablecoins every month. The timeline is short, with the act taking effect Jan. 18, 2027, or 120 days after the final rules are issued, whichever comes first.
Stablecoins are finally getting a set of guidelines that anyone can read, and they could see a growing number of national-level use cases, such as debt servicing and USD propagation. Yet the decentralized finance (DeFi) lending markets that stablecoins flow into have room to mature.
In a typical onchain lending market, an oracle supplies the price that decides when a loan gets liquidated, and token holders vote on changes to all of it, sometimes after the money is lent. Each component exists to protect users, but together they put a small number of decision-makers back at the center of the system.
It’s important to unpack how we got here. Curated vaults and standard oracle feeds have made DeFi far more accessible to users. An institution weighing onchain lending now gets a vetted menu of markets, one counterparty to evaluate and risk language its credit committee already speaks. This helped solve a critical onboarding issue, as early DeFi asked every depositor to be their own risk officer, when most weren’t equipped to be.
Yet as we’ve seen in crypto, convenience comes from concentration, and concentration is where the risk sits. When the same handful of risk managers and price feeds back billions in loans, one bad parameter or a brief price spike moves through every market that relies on that source, setting off liquidations in places that had nothing to do with the original error.
