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Counterparty Risk

Counterparty risk is the risk that another person or organization involved in a financial agreement fails to meet its obligations. A counterparty could be a borrower, issuer, bank, custodian, trading partner or another entity involved in an investment.

Why it matters to you

RWAs often depend on several organizations operating correctly. A token might function perfectly onchain while an offchain counterparty fails to make a payment, safeguard an asset or fulfill another obligation. Understanding who you depend on is therefore an important part of understanding the investment.

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