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Comment by gamblor956 | Hacker News Reader

I don't think law would prevent a fully collateralized loan on the basis of borrower/lender risks.

It doesn't.

AML seems a non issue too, as the loan only moves the question.

No, anti-money-laundering laws are at the heart of why the financial system can't do this. KYC laws apply at the customer level, so you only need to handle KYC once per customer. AML laws apply at the transaction level, so you need to apply them to each loan.

Cryptocurrency solves absolutely none of the existing legal reasons that banks can't issue large loans in minutes or seconds to existing (or new, well collateralized) clients.

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> Cryptocurrency solves absolutely none of the existing legal reasons that banks can't issue large loans in minutes or seconds to existing (or new, well collateralized) clients.

Yes, this is definitely correct in that crypto does nothing to solve the legal requirements of the banks and does not help the banks.

But it's worth mentioning that this sort of fully collateralized and anonymous borrowing does not (and would not) happen through banks, but through platforms like AAVE and Compound. It's a financial tool separate from banks. And these tools cannot be shutdown, as long as ethereum exists, these tools exist.

Banks don't need to issue fully collateralized loans. That is not a thing people need to do in the real world, because banks will gladly issue partially collateralized loans.

As for anonymous loans, those exist solely to service criminal customers, so that is not an advantage of cryptocurrency.

For people holding crypto assets which they don't plan to sell, it's a valid way to borrow other assets for use. Potentially for other investments. Definitely not just for criminals.

And overall, it's a demonstration of a financial product which can only be built in the space of decentralized finance. I do not know of another tool which allows anyone around the world to borrow significant amounts of money anonymously and without an account. Whether it's a net good for the world I don't know, but I do believe it's a powerful technology and space.

People who equate privacy from banks and the state with criminality are the reason the financial system has normalized mass-surveillance and the principle of 'guilty until proven innocent' inherent in AML laws, and the reason why the financial system has become so laden with financial friction, power disparities, and exclusion of marginalized populations.

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