RESEARCH

The Bank of Canada research report defines flash loans as blockchain-native financial instruments

ChainCatcher news, according to CryptoSlate, the Bank of Canada released an internal research discussion paper on March 21, analyzing flash loans and their policy relevance and potential risks. The research report defines flash loans as blockchain-native financial instruments that allow users to borrow crypto assets without collateral, provided that the loan must be repaid within a single atomic transaction.It is noteworthy that such internal discussion papers represent the central bank's comprehensive research outcomes on important issues and fall within the broad responsibilities of the Bank of Canada to assess the impact of emerging technologies on financial stability and market structure.Report author Jack Mandin points out that although flash loans are currently limited to blockchain networks, their underlying concept could extend to tokenized financial infrastructure if technical conditions are met. Such concepts include atomic risk-free lending, which could give rise to new systems supporting atomic transactions and programmable assets. The research also raises concerns about financial stability. If financial institutions begin to integrate smart contract lending, it could directly trigger risks.Furthermore, when blockchain assets (including those involved in flash loan activities) are embedded in traditional financial products (such as exchange-traded funds), it may create systemic risks.
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