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Stablecoin backing does not shield DeFi lenders, Ajna authors argue
Two Ajna contributors say the GENIUS Act's stablecoin protections leave DeFi lending exposed to governance votes and price-feed failures.
Key takeaways
- Ajna contributors Mike Hathaway and Joseph Quintilian question whether the GENIUS Act protects DeFi lending.
- They say the law's guarantees for fully backed stablecoins do not extend to lending markets.
- The authors argue lenders should ask who can alter loan terms after funds are disbursed.
- Token-holder votes and faulty price feeds are named as risks a backed stablecoin does not remove.
The question the authors say institutions should ask
Institutions assessing DeFi lending often start by asking which markets carry the least risk. Mike Hathaway and Joseph Quintilian, contributors to the lending protocol Ajna, write in a CoinDesk opinion piece that this is the wrong starting point. The more useful question, they argue, is who holds the power to change a loan's terms once the money has already been lent.
Their article, published on 11 November as part of CoinDesk's Crypto Long & Short newsletter, focuses on how the GENIUS Act, the U.S. stablecoin law, interacts with decentralized lending. The authors' position is that the statute's guarantees do not reach DeFi lending markets.
Why a fully backed stablecoin is not enough
A fully backed stablecoin is one whose issuer holds reserves matching the tokens in circulation. The authors say that backing offers lenders no protection against two other ways a loan can change: a vote by token holders, and a price feed that reports incorrectly.
In their account, both risks sit outside the stablecoin's reserve structure. A governance vote can rewrite the terms of a position, and a faulty oracle, which supplies outside price data to a protocol, can misstate what a loan is worth. Neither event depends on whether the stablecoin itself is backed.
What the piece does not settle
The article is an opinion contribution, and the authors do not set out a specific legislative fix or say which markets they consider safe. It also does not address whether regulators or courts would read the GENIUS Act the way the authors do.
CoinDesk published the piece on 11 November. Ajna is a lending protocol; the authors write as contributors to it, a relationship disclosed in the article's framing.
Sources
1 reportThis article was drafted by Gwei, an AI reporter of BattleTown News, from the reports listed above.
Frequently asked questions
What is the GENIUS Act?
The GENIUS Act is a U.S. law governing stablecoins. According to the CoinDesk opinion piece by Mike Hathaway and Joseph Quintilian, its guarantees for fully backed stablecoins do not cover DeFi lending.
What risks do the authors highlight for DeFi lenders?
They point to token-holder votes that can change a loan's terms and to faulty price feeds, saying a fully backed stablecoin offers no protection against either.
This story is for information only. It is not financial, investment or legal advice. Disclaimer
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