Private credit is not a single product but an asset pool with broad coverage. It spans everything from direct lending, mezzanine debt, and distressed debt to asset-backed lending secured by inventory, equipment, or receivables, as well as trade financing and real estate debt. What these instruments have in common is the design of tailored financing solutions based on the borrower’s credit quality, cash flow profile, or collateral value, with capital typically pooled through architectures such as GP/LP funds.
From an investment structure perspective, the value chain of private credit usually involves the borrowing enterprise, asset originator or manager, the fund’s general partners (GPs) and limited partners (LPs), and supporting service providers such as custodians and auditors. According to Moody’s and several market studies, around 70% of private credit investors are institutions or funds managing allocations on behalf of high-net-worth individuals. This institutional dominance reinforces stability but limits direct participation of retail investors in traditional markets.
However, high yields do not mean risk-free. Credit default remains the core risk of private credit, while the absence of a secondary market often locks investors in for three to seven years, imposing steep liquidity costs. Moreover, limited valuation transparency, uneven regulatory environments, and shifts in the macro interest-rate cycle can all amplify investment uncertainty. As a result, private credit is considered a high-risk, high-return asset class requiring professional management and risk-control capabilities. A widely-agreed upon path for improvement involves mirroring offline assets’ cash flows and obligations on-chain without altering existing legal and risk-control frameworks. Programmable infrastructure can then facilitate registration, distribution, income allocation, and controlled transfers, reducing operational frictions and expanding accessible capital while reserving space for compliant secondary circulation. This has been the fundamental driver behind the rapid advancement of the tokenization of real-world assets (RWAs) over the past three years.
2. RWA Tokenization Trends: Scale, Structure, and Network Distribution (2022–2025)
Against this backdrop, RWA tokenization is rapidly gaining traction. It aims not to introduce new risk factors but rather to build on existing legal structures to digitally represent and settle assets such as treasury bonds, corporate bonds, credit instruments, real estate, and commodities on-chain. By combining the “stable cash flows” of traditional finance with the “programmability and composability” of Web3, RWA tokenization provides institutions and high-net-worth investors with more efficient and traceable vehicles for holding and transferring assets.
Over the past three years, the RWA market has developed in leaps and bounds. According to monitoring data from platforms such as RedStone and RWA.xyz, the market size of non-stablecoin RWAs grew from approximately $5 billion in 2022 to $28 billion by August 2025, a cumulative increase of nearly 460%. Even in periods of crypto downturns, RWAs continued to expand against the tide, demonstrating countercyclical resilience and emerging as a key bridge between traditional finance and decentralized finance.
In terms of network and technology distribution, Ethereum remains the primary chain supporting RWAs, accounting for 50%–60% of the market and securing assets worth more than $7 billion. At the same time, new networks are emerging. For instance, ZKsync Era has aggregated over $2 billion in private credit assets through partnerships with protocols such as Tradable; Solana has built up several hundred million dollars in tokenized treasury bills and funds; while Aptos, Avalanche, and some permissioned blockchains (e.g., Provenance) are hosting pilot projects from traditional institutions such as KKR and Hamilton Lane.
Within this broader trend, private credit has become the largest subcategory. By August 2025, tokenized private credit assets were valued at approximately $12–16 billion, accounting for 50%–60% of the overall RWA market. Comparatively, tokenized U.S. Treasury bills (T-Bills) represented around 25%–30%, while commodities (mainly gold) and real estate assets together made up less than 15%. In other words, although tokenized treasury bills initially gained early traction because of their risk-free rate, as the market matures, investors have increasingly sought higher risk premiums. As a result, private credit has grown more rapidly than other categories and has emerged as the dominant force in the RWA market.
This trajectory reflects not just an expansion in scale but also a shift in market structure. The entry of institutional investors has been the clearest signal of this change: between 2023 and 2025, leading global asset managers and private equity giants, from BlackRock and Franklin Templeton to Apollo and KKR, have launched tokenized funds and credit products. These cross-market initiatives lend credibility to the RWA space while also expanding the asset pool available for tokenized private credit. As these capital-heavy institutions continue to ramp up their allocations, private credit’s central role in the RWA ecosystem is expected to strengthen further.
3. Tokenized vs. Traditional Private Credit: Scale, Returns, Liquidity, and Transparency
As mentioned earlier, the traditional private credit market is already highly mature, with massive scale and heavy institutional participation. By the second quarter of 2024, global private credit AUM stood at nearly $2 trillion, including approximately $1.34 trillion in the U.S. Moody’s projects that this figure could reach around $3 trillion by 2028. In contrast, tokenized private credit remains nascent. According to real-time dashboards from RWA.xyz, by August 2025, active loans of tokenized private credit totaled around $16 billion, less than 1% of the global private credit market, but its volume multiplied after 2022, making it the largest segment within RWAs. In a word, it remains a small yet fast-growing parallel ecosystem, accelerating its expansion along the paths of institutionalization and regulatory compliance.
In terms of yield and cost structures, the two differ. Traditional private credit typically targets or delivers annualized yields of 8%–12% (depending on tranche and leverage), but at the fund level, the comprehensive fee rate is around 3%–4% (based on industry measures of management fees, performance fees, and operating costs). By contrast, the tokenized model relies on smart contracts and on-chain settlement to automate processes such as origination, registration, accrual, and distribution, offering greater cost transparency and operational efficiency. For example, platforms like Figure and Maple have moved part of the above processes on-chain, but their underlying credit risk assessment still relies on offline due diligence and compliance structures. Thus, technological efficiency does not fully replace asset quality.
L iquidity and exit mechanisms highlight a stark contrast. Traditional private credit typically comes with a lock-up period of three to seven years, with limited secondary transfer channels, thus requiring long-term capital commitment from investors. Tokenized private credit offers greater flexibility in form: investment shares exist as digital tokens that can be transferred within whitelists, and some products are even tradable on regulated secondary markets or decentralized protocols. However, in real life, secondary markets for these tokens remain thin, with trading activity and liquidity falling far short of expectations. While tokenization enhances exit potential, market development is needed to fulfill this promise.
When it comes to transparency and risk management, both traditional and tokenized models have their strengths and limitations. Traditional funds operate within a mature valuation system, typically involving credit ratings, third-party audits, and periodic reporting, though updates are infrequent. In contrast, on-chain credit protocols provide near-instant visibility into cash flows and positions through real-time blockchain data, thus strengthening information symmetry. Nonetheless, on-chain protocols still depend on off-chain service providers, SPV documentation, and legal frameworks to ensure tokens correspond to underlying assets. Despite high transparency, safeguards rely on off-chain credit quality and compliance.
Tokenized private credit should not be seen as a replacement for traditional private credit but a parallel track. The vast and institution-driven traditional market pursues stable, long-term, closed-end returns. By contrast, the on-chain market is experimenting through rapid trial and error with automated, composable, and global financing pathways, drawing in more agile capital and new classes of investors. The former is like a “giant vessel” while the latter resembles a “speedboat”. Over time, the two may converge: as traditional institutions tokenize fund shares, or as on-chain protocols bring in more institutional-grade asset originators, the boundary between the two markets will gradually blur.
4. Bridging Mechanisms: Two Tokenization Pathways and Their Operational Logic
Tokenized private credit is unique due to its role not just as a new asset class but as a bridge between traditional finance (Web2) and on-chain finance (Web3). By leveraging blockchain’s programmability and global network effects, private credit is repackaged, fractionalized, and redistributed, thus reshaping the very model of asset lifecycle management.
In order to bring offline cash flows on-chain, the industry has largely taken two paths: digitizing existing funds and directly creating loans or asset pools on-chain. These two paths are not mutually exclusive and are steadily converging.
Path One: Transforming Traditional Funds into “On-chain Shares”
This approach is straightforward: retain the original legal and compliance framework (such as qualified investors, whitelists, KYC/AML) but replace issuance and registration with tokenized securities shares. This ensures regulatory certainty while lowering the minimum subscription threshold from hundreds of thousands or even millions of dollars to tens of thousands enabling limited secondary transfers.
● For example, KKR‘s Healthcare Growth Fund was issued as tokenized feeder shares on Avalanche via Securitize; Hamilton Lane‘s SCOPE private credit fund was first moved on-chain through Securitize and later expanded to Solana via Libre, lowering minimum investment thresholds to just $10k–$20k.
Path Two: Creating On-Chain Loans and Asset Pools Directly Through On-chain Protocols
Here, it is no longer about the “digital twin of a fund” but to structure trading and settlement around smart contracts: Off-chain debt is packaged into special purpose vehicles (SPVs), which issue tranche tokens (senior/junior) to reflect different levels of credit risk. Subscriptions, accruals, payouts, and redemptions are all automated by smart contracts, typically in conjunction with whitelists and KYC/AML (Know Your Customer/Anti-Money Laundering) requirements.
● For example, Maple relies on pool delegates to conduct credit due diligence and extend loans to institutions and qualified investors; Goldfinch adopts a “Backers (first-loss capital) + Senior Pool” structure with identity verification; Centrifuge/Tinlake employs an SPVs + DROP/TIN (senior/junior) dual-tranche model to underwrite receivables and consumer loans; and Tradable (ZKsync) collaborates with institutional managers to bring private credit assets worth billions of dollars on-chain for distribution.
Path One is closer to a digital representation of Web2 securities, with its advantage being regulatory certainty and a lower entry barrier. Path Two operates more like an automated assembly line for structured finance, with key strengths in efficiency, composability, and transparency. The former answers the question of “ how to make existing products easier to trade“, while the latter tackles “ how to issue, manage, distribute, and transfer assets natively on-chain“. Ultimately, both paths will converge around compliance, custody, and secondary markets.
5. Representative Platforms
Figure/Provenance
Founded by SoFi’s co-founder Mike Cagney, Figure is widely regarded as the leading player in tokenized private credit. Its core business model is to build a closed loop around U.S. home equity lines of credit (HELOCs): Figure originates loans → records and tokenizes them on its proprietary blockchain Provenance → distributes them on the secondary market via the Figure Connect platform. As of the first half of 2025, Figure had issued over $16 billion in HELOCs, with over $13 billion processed on secondary markets. Controlling more than 40% of the global on-chain private credit market, Figure is seen as the player with the greatest potential for large-scale expansion.
Figure’s strengths lie in self-sufficiency on the asset side (strong loan origination capability), a tight match between on-chain registration and legal structures, and a capital markets platform connecting institutional investors. However, it also faces risks from centralized governance (Cagney holds 90% of voting rights) and challenges arising from its heightened sensitivity to U.S. real estate and interest rate cycles. Following its IPO on September 15, 2025, under the ticker “FIGR”, and as the “first RWA stock”, Figure’s business model faces further scrutiny.
Maple Finance
Maple is one of the earliest protocols to bring institutional lending on-chain, serving primarily trading companies, market makers, and funds. Its product form is for “pool delegates” to create loan pools, into which investors deposit funds and from which borrowers draw directly. Targeting qualified investors, Maple operates simultaneously across both Ethereum and Solana chains. By mid-2025, Maple’s active loan balance was approximately $770 million, with over $3.3 billion in cumulative loans issued.
Maple’s advantage is providing efficient financing channels for crypto-native institutions, but its risk management capabilities were once questioned. In 2022 and 2023, several borrowers defaulted, leading to restricted LP redemptions. Since then, Maple has introduced a stricter pool delegate system and stronger risk segregation mechanisms in an effort to regain investor trust.
Goldfinch
Goldfinch pioneered “ crypto-uncollateralized” lending, built around a tranche structure of Backers (junior tranche, first-loss investors) and Senior Pool (lower-risk investors). Borrowers must be approved by Auditors and complete a Unique Entity Check before they can create loan pools. Once Backers invest initial capital, the Senior Pool allocates funds based on a leverage model, with loan agreements held through SPVs.
Goldfinch’s design excels at bringing real-world SME financing directly on-chain, but its credibility has been eroded by risk events. After 2023, defaults among borrowers in some emerging markets caused the protocol’s scale to shrink. Goldfinch’s experience shows that while on-chain mechanisms enhance transparency and efficiency, credit risk ultimately depends on the quality of underlying assets.
Centrifuge
Centrifuge focuses on “asset pool tokenization”, packaging RWAs (e.g., receivables and consumer loans) into SPVs and then issuing senior/junior tranched bond tokens. Investors can subscribe to these tokens within the protocol and use senior tranches as collateral to mint stablecoins in MakerDAO or Sky protocols (e.g., USDS). This model effectively connects off-chain assets to DeFi money markets through a structured design. As of 2025, Centrifuge has partnered with multiple asset originators to bring hundreds of millions of dollars of loans on-chain. Its strength lies in strong composability with DeFi, though it continues to face limited liquidity in secondary markets and dependence on loan repayments for investor redemptions.
Tradable
Tradable is a protocol that has been rising over the past two years. Built on ZKsync Era and in partnership with Victory Park Capital, Tradable had tokenized over $2 billion in assets by mid-2025. It is characterized by its focus on institutional collaboration, working directly with large private equity funds on the asset side, while using ZK technology to optimize transactions and compliance verification. As ZKsync continues to gain traction within the RWA ecosystem, Tradable has established itself as a major player, second only to Figure.
General Processes: Role Division and On-/Off-Chain Boundaries
Common ProcessFigure (with HELOC Product as Example)MapleGoldfinchCentrifugeTradable0) Role Definition (Who Borrows/Who Provides Capital)Borrower: Individual homeowners (HELOC, secured by property lien).Capital Provision: Two channels –– ① Institutional capital via Figure Connect → ABS underwriting; ② Individuals or institutions can lend via Democratized Prime’s YLDS·HELOC pool (requires a Figure Markets account and KYC, subject to jurisdiction restrictions).Borrower: Businesses (crypto or non-crypto). Capital Provision: Primarily qualified or institutional investors that have completed KYC, with the platform employing a Global Permissioning framework (global whitelist). Certain products (e.g., Cash Management) are limited to qualified investors with a minimum investment of 100,000 USDC.Borrower: off-chain enterprises or fintechs. Capital Provision: Investors verified via UID (KYC/KYB/qualification checks), typically qualified or jurisdiction-restricted. No crypto collateral is used, with loans secured by off-chain assets or income.Borrower: Asset originators package receivables, real estate, equipment, etc., into SPVs. Capital Provision: KYC-verified/whitelisted investors (typically qualified or institutional investors).Borrower: Institutional-grade private credit portfolios. Capital Provision: Primarily institutional investors, with the platform offering programmatic compliance for AML/KYC/KYB/KYT.1) Investor Access (KYC/Whitelist)Connect/ABS: Institutional access through compliance, with registries or statuses recorded on Provenance (DART).DP (YLDS·HELOC): Account opening and KYC through Figure Markets, with participation through YLDS.Once KYC/KYB is completed, investors are automatically added to a Global Allowlist. Pool access is permissioned, and only whitelisted addresses can participate. Some products are restricted to qualified investors only. ⛓ Whitelists are enforced on-chain.UID (ERC-1155) serves as an access credential (recording KYC/KYB/qualification status on-chain). Address permissions and roles are also written on-chain.Securitize/KYC + whitelisting; some pools require whitelist approval for both subscription and redemption. ⛓Whitelist status is recorded on-chain.Platforms offer a full compliance stack covering KYC/AML/KYB/KYT. Compliance/transfer restrictions are enforced through smart contracts.2) Due Diligence, Collateral/Credit Enhancement, and SPV SetupReal estate appraisal and lien registration, loan agreements; assets are transferred into SPVs or securitization channels where necessary. Rights/status and changes are registered on DART.Pool Delegates perform offline credit due diligence and set loan terms; “first-loss cover” serves as downside protection (provided by delegates or dedicated funds) instead of standardized junior/senior token tranching. ⛓ Pool parameters are written in smart contracts.Borrowing is fully collateralized by off-chain assets or income, subject to approval by auditors. ⛓ Tranching thresholds and parameters are written on-chain.Assets are placed into SPVs (bankruptcy remote), with perfected collateral/account controls. ⛓ Pool parameters are contract-based.Institutional-grade private assets + SPV legal structures. ⛓ Mapped and recorded on ZKsync.3) Issuance/Registry (Restricted Tokens/Registration)Connect/ABS: Loans/ownership rights and transfers are registered on Provenance; registries are written back into traditional systems. DP: Accounting or settlement is conducted via YLDS (a non-public security token), with on-chain records of contributions and status.Pool shares or LP positions are subject to whitelist and transfer restrictions. Registers/subscription documents maintained off-chain (permissioned pools).FIDU (Senior Pool) and Borrower Pool positions, with restricted transfers and NAV-based pricing.DROP (priority)/TIN (first-loss cover) are issued as ERC-20 tokens, subject to restricted transfer and registry requirements. Redemptions or subscriptions processed in epoch batches.Debt or shares are tokenized and recorded on ZKsync. Registry and compliance records are synchronized.4) Fundraising and TranchingConnect/ABS: Tranching occurs off-chain in ABS (Class A/B…), with registration and status synchronized on-chain. DP (YLDS·HELOC): Hourly Dutch auction pricing and short maturities/daily liquidity; no public junior/senior tranching (typically pari passu repayments).No standardized token tranching; risk mitigation relies on first-loss cover and contractual constraints, with pool parameters set by the pool delegate.*Backers (junior/first-loss cover) + Senior Pool (leveraged/second-loss cover)*dual-layer structure.Fixed two-tranche DROP/TIN structure, with contract-based thresholds and watermarks.Custom structures may be set per project or asset (often under institutional terms), focusing primarily on compliance and information disclosure.5) Disbursement and SettlementBanks or custodians disburse funds off-chain to homeowners, while loan status and balances are recorded on-chain. DP: After transactions are executed, settlements and positions are updated hourly or daily.Depending on the product: for example, Cash Management operates through an on-/off-chain flow of “on-chain USDC → borrower SPV → fiat account → investment exclusively in T-Bills”. Both cash and asset flows can be monitored in real time via the front end. Loan contracts take effect off-chain.Borrowers receive fiat disbursement. Interest accrual and accounting are managed via contracts.SPVs manage disbursement and custodial aggregation. Pool balances and receivables are updated through smart contracts.Disbursement and settlement are executed by institutions or custodians. Ledgers are synchronized on ZKsync.6) Loan Period: Accrual/Distribution/DisclosureHomeowners make periodic repayments off-chain, with ownership rights and events disclosed via DART or on-chain. DP: Interest accrues in YLDS and is distributed according to the rules.Contracts manage accruals and distributions. Reports and compliance disclosures are made off-chain (permissioned pools accessible to qualified investors).Contracts accrue interests and distribute them to FIDU and Backers. Auditing and reporting are performed off-chain.Contracts execute automatic waterfall distributions. Custody and auditing are performed offline.Protocols manage accruals and distributions. Disclosure and reconciliation are performed by institutional participants.7) Redemption and Secondary CirculationConnect/ABS: Secondary trading occurs primarily within ABS/Connect (institutional), with registries and status recorded on-chain. DP: Hourly redemptions or reinvestments (per pool rules).Cash Management Pools: Redemption windows open daily on business days (3:00 pm – 6:00 am next day, UTC-4); Positions and assets are transparent. Other permissioned pools follow pool-specific rules and availability.Senior Pool (FIDU): NAV-based redemption with a 0.5% redemption fee, processed biweekly; payouts may be made in installments depending on available liquidity. Redemption requests are recorded on-chain.Epoch-based subscriptions and redemptions; restricted transfers within the whitelist; interoperable with compliant secondary markets.Transfers are restricted to within whitelists or through institutional OTC or ATS channels, subject to compliance modules.8) Default Handling and RecoveryDefaults, foreclosures, and settlements are processed off-chain, while suspension of distributions, write-downs, and event disclosures are marked on-chain.Legal recourse and collateral disposal occur off-chain. Smart contracts trigger distribution suspensions or write-downs; first-loss cover absorbs losses first.Recoveries are carried out off-chain. Contracts disclose defaults and allocate losses according to the tranche structure.SPVs liquidate underlying assets; investors hold no direct claim to property, and recovered funds are distributed through a waterfall mechanism. Default events and distributions are recorded on-chain.Institutional recovery is managed through legal procedures. Events and distributions are synchronized on-chain.
Case Study: Figure HELOC
Below is a lively “mini-drama” about Figure HELOC, showing how a borrower can obtain private credit through the Figure HELOC.
Characters
● Alice –– Homeowner/Borrower
● Bob–– Retail investor (using Democratized Prime’s “ YLDS · HELOC” lending pool)
● Figure Markets (Digital Prime Brokerage) –– Matching and on-chain bookkeeping
● Digital Asset Reference Token (DART) runs on Provenance –– with on-chain lien/ownership registration
● Bank/Custodian –– Handles fiat disbursement and repayment collection
Process
Application and Approval (Online)
● Alice wants $40,000 to renovate her kitchen. She applies for a HELOC on Figure’s website, submits information related to her house and identity, and receives approval with a credit limit and interest rate.
Lien Registration (Offline)
● Local county or state registry office registers a lien on Alice’s property, legally establishing the lender’s priority claim, which is a legal step required in the real world.
On-Chain Registration (On-Chain)
● Figure records the HELOC’s ownership and lien status in DART (operating on Provenance). Any subsequent transfer or change can be verified on-chain by authorized parties.
Bob’s Account Opening and Funding (Online → On-Chain)
● Bob opens an account with Figure Markets, completes KYC, deposits funds, and purchases YLDS (an interest-bearing dollar instrument used within DP for lending).
Dutch Auction Matching (On-Chain)
● Bob sets his target interest rate in the “YLDS · HELOC” pool. The pool conducts hourly Dutch auctions to match lending capital with HELOC loan demand (including loans like Alice’s), executing transactions at a market-clearing rate.
Disbursement and Synchronization (Both Offline + On-Chain)
● The bank or custodian disburses funds to Alice (offline). At the same time, DART updates the on-chain record to reflect the disbursement and ownership status, maintaining transparent registries.
Post-Loan Services and Distribution (Offline → On-Chain)
● Alice repays monthly in fiat (which is collected by the servicer or custodian). Figure Markets’ smart contracts calculate and distribute interest to Bob’s YLDS holdings as per the rules. Bob can view balance and yield changes on-chain.
Redemption or Reinvestment (On-Chain)
● Bob can redeem or reinvest funds according to pool rules (generally supporting hourly or daily liquidity). When Alice prepays or fully repays the loan at maturity, the lien is released offline, and the release is recorded in DART on-chain.
6. Returns and Risks: Tokenized Private Credit vs. Mainstream DeFi
One of the core selling points of tokenized private credit is its delivery of “ real yield“. It provides investors with returns derived from the cash flows of corporate or project borrowers, rather than relying solely on token inflation or liquidity mining. This stands in stark contrast to traditional DeFi protocols.
Yield Comparison
In traditional markets, private credit typically delivers yields of 8%–12%, about 150–300 basis points higher than public market loans. In certain emerging markets or trade finance scenarios, yields may reach 18%–22%. On-chain tokenized private credit products generally maintain similar levels. For instance, protocols such as Maple, Centrifuge, and Goldfinch target returns of 8%–10% for senior tranche investors, while junior tranches may deliver double-digit returns. According to tracking data from RWA.xyz, as of mid-2025, the average annualized yield for on-chain private credit stood at 9%–10%, closely aligned with offline markets.
By contrast, yields in traditional DeFi protocols are far more volatile. Stablecoin lending on blue-chip protocols (such as Aave and Compound) usually offers annualized yields of around 2%–6%. Staking ETH or LSDs (e.g., Lido stETH, EigenLayer) provides baseline yields of 3%–5%. High-risk “yield farms” reliant on incentive tokens may seemingly deliver double-digit or higher returns, but their sustainability and stability are poor. In short, tokenized private credit offers returns that are closer to traditional financial benchmarks, rather than being driven by speculative market sentiment.
Considerations After Risk Adjustment
The differences between the two become even more pronounced when viewed from a risk adjustment perspective.
● The primary risks of private credit lie in credit defaults and repayment uncertainty. Although on-chain protocols incorporate buffer mechanisms through the tranching design and the collateral structure, their fundamentals still rest on the borrower’s credit quality. In the event of a default, junior tranches may lose everything.
● By contrast, risks in DeFi protocols center on smart contract vulnerabilities, failures in liquidation mechanisms, and systemic liquidity shocks. The multiple liquidation events between 2022 and 2023 have revealed that during periods of extreme market volatility, even with high-quality collateral, force liquidation and user loss may occur due to oracle failures or insufficient liquidity.
From an investor’s standpoint, private credit offers cash flows backed by real-world assets, with default probabilities generally lower than liquidation risks under extreme on-chain conditions. However, it comes with poor liquidity. DeFi, on the other hand, offers higher real-time liquidity, but its returns are highly correlated with the beta volatility of the crypto market.
Liquidity and Exit Mechanisms
● Private Credit: Most tokenized products are subject to whitelisted restrictions, and investors typically depend on loan repayments for redemptions, which may take months. As for secondary market circulation, depth is currently limited.
● DeFi Protocols: Investors can usually deposit and withdraw funds at any time. When pools are large, liquidity is excellent, but during market turbulence or liquidity crunches, borrowing rates and utilization ratios can fluctuate sharply.
In sum, tokenized private credit provides medium- to long-term, stable real yields, but at the cost of liquidity. By contrast, DeFi protocols offer flexible, short-term yields but come with higher risk and volatility. The two therefore serve complementary roles in portfolio allocation: the former suits institutions or long-term capital seeking steady cash flows, while the latter caters to crypto-native investors in need of flexible rebalancing.
7. Outlook: Compliance, Standardization, and Secondary Liquidity
As global capital markets digitize, several clear trends are emerging in the development of tokenized private credit. Although it currently accounts for less than 1% of the global private credit market, its rapid growth and significance as an institutional experiment have made it widely regarded as one of the most promising segments in the RWA space.
First, compliance and regulatory frameworks are becoming clearer. Major financial hubs such as the U.S., EU, Hong Kong, and Singapore are accelerating the development of institutional frameworks for security tokens and regulated trading venues. With a clear legal position and the implementation of investor protection measures, traditional asset managers are more likely to issue and distribute fund shares and loan assets as tokens, paving the way for large-scale inflows of institutional capital.
Second, product structures and standardization continue to improve. From standardized loan agreements in its early days to today’s tranched pools, compliant whitelists, and SPV structures with on-chain tokens, tokenized private credit has gradually established a replicable model. In the future, standardized debt-token protocols (such as ERC-1400 series) are expected to emerge, integrated with custody, clearing, and auditing systems to enable true cross-platform circulation of assets.
Third, the development of secondary markets and liquidity infrastructure will be critical. Most products remain confined to transfers within whitelists, and insufficient liquidity is the biggest obstacle to their attractiveness. With the emergence of regulated alternative trading systems (ATS), compliant DEXs, and on-chain market makers, the liquidity of tokenized credit is expected to improve significantly, thereby unlocking stronger demand for capital allocation.
Fourth, the convergence of DeFi and TradFi is accelerating. Tokenized credit is not merely about “moving traditional assets on-chain” but is increasingly becoming foundational collateral within DeFi. Protocols like Centrifuge have already experimented with using senior tranches as collateral to mint stablecoins. In the future, more on-chain money markets may adopt RWAs as core underlying assets. This will drive DeFi’s evolution from a closed loop of crypto-native assets toward direct integration with global credit markets.
Fifth, the institutional adoption pathway is becoming clear. In the near term, qualified investors and institutions, particularly pension funds, insurance companies, and sovereign wealth funds, will remain the core participants in tokenized private credit. Over the medium to long term, lower investment thresholds and increasingly stable compliance frameworks may open products to high-net-worth individuals and even retail investors, propelling the market from “pilot programs” toward “mainstream adoption”.
Sixth, risk management and transparency tools continue to mature. Default and credit risk remain the central challenges of private credit. In the future, a more comprehensive risk control framework could be formed through the integration of real-time on-chain data, external credit ratings, insurance mechanisms, and ZK technology. For example, counterparty credit assessments, loan performance indicators, and cash flow monitoring could all become on-chain and made programmable, offering investors unprecedented transparency.
Overall, the development trajectory of tokenized private credit is likely to follow a “ slow first, fast later” pattern: growth may be moderate during the gradual improvement of regulatory and market infrastructure, but will accelerate rapidly once the institutional and technological conditions are in place. Given that the traditional private credit market already exceeds $3 trillion, raising the tokenization penetration rate to just 5% would mean a new market worth hundreds of billions of dollars. This is precisely why institutional investors and Web3 entrepreneurs are racing to establish their presence in this sector.
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Reference:
● The Defiant — Private Credit Leads RWA Tokenization Boom https://thedefiant.io/news/defi/private-credit-leads-rwa-tokenization-boom-report
● Cointelegraph — Private credit powers $24B tokenization market (RedStone) https://cointelegraph.com/news/private-credit-powers-24b-tokenization-market-ethereum-still-dominates-redstone
● S&P Global — Tokenized Private Credit: A New Digital Frontier for RWAs (PDF) https://www.spglobal.com/content/dam/spglobal/global-assets/en/special-reports/Corp_1022_TokenizedPrivateCredit.pdf
● 深潮·加密城 — RWA 信贷入门（中文） https://www.cryptocity.tw/news/rwa-credit
● 深潮 TechFlow — RWA 全景调研（中文） https://www.techflowpost.com/article/detail_26687.html
● RWA.xyz — Private Credit（实时面板） https://app.rwa.xyz/private-credit
● Moody’s — Private Credit 2025（Outlook） https://www.moodys.com/web/en/us/insights/credit-risk/outlooks/private-credit-2025.html
● 深潮 TechFlow — Figure 与“万物上链”（中文） https://www.techflowpost.com/article/detail_27905.html
● Gate Learn — RWA 与私人信贷（第一部分，中文） https://www.gate.com/zh/learn/articles/rwa–private-credit-pt-1-market-opportunities-for-on-chain-private-credit-trade-finance/4154
● Goldfinch Whitepaper (v1.1, 2021)（PDF） https://uploads-ssl.webflow.com/62d551692d521b4de38892f5/631146fe9e4d2b0ecc6a3b97_goldfinch_whitepaper.pdf
● IMF — *Global Financial Stability Report*（含私人信贷专题）https://www.imf.org/en/Publications/GFSR
● Federal Reserve — FEDS Notes（2025-05-23）： Bank Lending to Private Credit https://www.federalreserve.gov/econres/notes/feds-notes/bank-lending-to-private-credit-size-characteristics-and-financial-stability-implications-20250523.html
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