Bank for International Settlements Research: DeFi Borrower Behavior is Key to Measuring Tokenization Risk

News on March 14, a study by the Bank for International Settlements (BIS) concluded that the behavior of borrowers in the DeFi field and DeFi market dynamics are important considerations when designing and managing platforms involving tokenized assets. It pointed out that because DeFi borrowers face huge losses during automatic liquidation (when the risk of a borrower's position is too large, collateral will be automatically sold), they usually avoid excessive leverage. Borrowers have taken a conservative approach with quite a large buffer. In addition, if DeFi users have had high returns in the past, they tend to deposit more money. The authors of this study, Lioba Heimbach and Wenqian Huang said their findings may be related to understanding financial stability concerns triggered by DeFi. They used data from Ethereum blockchain for this research focusing on loan elasticity and strategic substitution behavior.