Export Risk
As previously shown, in order for exporting member B on network B to receive their payment, network B’s Proxy Account needs to mint new Stable Credits and remit them to member B.
This increases network B’s circulating Stable Credit supply in the same way in which new member debt would increase it. However, while Stable Credits created through member debt are eventually reabsorbed when the indebted member fulfils their debt obligation, Proxy Account debt created through exports can only be cleared by corresponding imports (by members of network B acquiring goods and services offered by members on other networks).
Consequently, when network B agrees to sell goods and services to other networks in the Clearing House, it has to assume that these exports will eventually be matched with corresponding imports. If this does not occur, meaning members on network B do not find anything worthwhile to acquire on other networks, network B’s debt position remains open and will eventually have to be covered by its Reserve, in the same way in which defaulted member debt is covered (read more under Credit Risk).
As a result, exporting networks assume risk which is carried collectively by the network as a whole. As we’ll show in the following chapter, the import/export limits set by the Clearing House, in conjunction with its fee structure, are designed to mitigate this risk, while driving the inter-network market towards a faster and more efficient resolution of trade imbalances.
Last updated