Risks and Challenges

- **Default risk:** If members run negative and leave, others bear the loss; limits and vetting matter. - **Network thickness:** Too few members or narrow offerings → hard to earn back to zero. - **Tax & compliance:** Trades are usually taxable; records and reporting are needed. - **Interoperability:** Closed circles can feel… closed. Clearing between circles helps (see below).

# See - Mutual Credit and How It Works? - How is it Different? - Governance Levers - Mutual Credit Strengths - Risks and Challenges - Common Variants