What guarantees the loan? What if I borrow crypto and never pay? The only thing supporting debt in the traditional system is regulation and law. You can't garnish a paycheck for a crpto debt so this system can't work without regulation and can't be anonymous.
The best future system should not have debt at all.
With most platforms I have seen you use crypto as collateral, with Loan to value usually around 50% or less meaning if you deposit $100 of crypto they will only lend you $50. If you don't meet your repayments or the price of the crypto starts dropping they start liquidating your holdings.
That doesn't make sense to me. If I already had 100 in crypto, why would I give it up and risk the institution being hacked or to run off with funds and not just spend the 50 from the 100 I already have?
Loan interest could be tax deductible, you may be squeezed for cash and not want to sell and realise a gain. The other one is traders they might be using that collateral to short or leverage something else. Personally if I am risking my assets I want to receive interest not pay it.
What if I borrow crypto and never pay?