Summary
TLDR: Prime Brokers (PBs) are becoming significant players in the crypto lending market with strict lending standards, but if returns on low-risk strategies decrease, they may take on riskier clients, increasing systemic risk.
Key Points
1) PBs are emerging as a major player and lender in crypto markets
2) The current lending standards of PBs are tight, largely lending to low drawdown strategies (like delta-neutral), and presents low systemic risk
3) If expected returns of delta-neutral strategies decline, then PBs may move out the risk curve in terms of who they are willing to lend to and what services they offer, which could brew systemic risk