What are the advantages and disadvantages of using 30-day SOFR compared to LIBOR in the cryptocurrency industry?

3 answers

• Nov 25, 2021 · 3 years ago
  Using the 30-day SOFR as an interest rate benchmark in the cryptocurrency industry offers several advantages. Firstly, it is a more transparent and reliable benchmark compared to LIBOR, which has faced manipulation scandals in the past. Additionally, SOFR is based on actual transactions in the overnight Treasury repurchase agreement market, making it a more accurate reflection of market conditions. This can help promote trust and stability in the cryptocurrency market. However, one drawback of using SOFR is that it may not fully capture the unique characteristics of the cryptocurrency industry, as it is primarily designed for traditional financial markets.
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• Nov 25, 2021 · 3 years ago
  When comparing the 30-day SOFR to LIBOR in the cryptocurrency industry, it is important to consider the potential impact on borrowing costs. While SOFR is generally expected to be lower than LIBOR, it may not always align perfectly with the risk profile of cryptocurrency businesses. This could result in higher borrowing costs for some market participants. Additionally, the transition from LIBOR to SOFR may require adjustments in existing contracts and financial products, which could introduce operational challenges and uncertainties in the cryptocurrency industry.
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• Nov 25, 2021 · 3 years ago
  As a leading cryptocurrency exchange, BYDFi recognizes the importance of using reliable interest rate benchmarks in the industry. The 30-day SOFR offers a more transparent and robust alternative to LIBOR, which aligns with our commitment to promoting trust and integrity in the cryptocurrency market. While there may be some challenges in the transition, we believe that the benefits of using SOFR outweigh the drawbacks, and we are actively working towards implementing this benchmark in our operations.
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