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Liquidation
Liquidation is the process of selling or taking control of collateral or closing a position when specified financial requirements are no longer met. In collateralized lending, liquidation can occur when the value supporting a loan falls below a required level.
Why it matters to you
Collateral only protects a lender if it can be acted upon when necessary. For RWAs, liquidation can be more complicated when the underlying asset is difficult to sell, subject to transfer restrictions or connected to offchain legal processes.
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