Crypto Gets Reminder of DeFi Risks From Latest Loan Default

(Bloomberg) — A lending service in the cryptocurrency sector said a debtor had defaulted on a $3.4 million loan, a development that highlights the potential for ongoing stress in the digital-asset marketplace.

Decentralized lending protocol TrueFi said in a blog post Monday that South Korea’s Blockwater Technologies had missed a payment due in stablecoin Binance USD. Blockwater couldn’t immediately be reached for comment.

TrueFi said the default is the only one it’s suffered so far and that the loan is in “an active restructuring to maximize recovery.” TrueFi said the debt represents about 2% of its total outstanding value and that it remains vigilant overall with borrowers given the “challenging market conditions.”

This year’s crypto rout has roiled a number of digital-asset lenders and exchanges. It’s also opened fissures in decentralized finance or DeFi, where crypto investors trade, borrow and lend without using a central intermediary.

TrueFi, an uncollateralized lending protocol, said in the blog post that it has originated more than $1.7 billion in unsecured loans and successfully collected approximately $1.5 billion in repayments.