Private loans fueled by blockchain surge by more than 55% to reach $581m in 2023
Blockchain-based private credit is gaining popularity in 2023 as companies seek financing in a high-interest-rate environment. According to data from RWA.xyz, blockchain-powered private loans have increased by 55%, reaching approximately $581.6 million as of December 18. Although this amount is less than the peak of nearly $1.5 billion in June 2022, it is still significant as the total value of loans has exceeded $4.5 billion.
The traditional private credit market, with a value of $1.6 trillion, still dominates the industry, overshadowing the emerging blockchain-based private credit sector, as reported by Bloomberg.
Out of the nine RWA protocols, only one extends its services beyond Ethereum to Solana, while another operates on Ethereum’s sidechain, Polygon. Currently, Centrifuge leads in active value, with over $255 million in active loans and a total loan value exceeding $492 million, according to RWA.xyz data.
Blockchain lending, which leverages increased transparency and smart contracts, is known for reducing risks and lowering borrowing rates compared to the slower and more opaque traditional private credit market. This evolving landscape is appealing to investors, as blockchain protocols charge borrowers less than 10% APR, in stark contrast to the 15% to 20% rates prevalent in traditional finance.
Crypto giants are also entering the blockchain-based private credit space with new developments, such as Project Diamond by Coinbase Asset Management. As previously reported by crypto.news, this new product utilizes Ethereum’s layer-2 scaling network, Base, and integrates Coinbase’s components, including the exchange’s Prime services, web3 crypto wallet, and Circle’s USDC stablecoin.
Currently, Project Diamond is accessible to registered institutional users outside the U.S. The launch comes at a time of intense competition to integrate traditional financial assets like bonds and credit into blockchain systems, a process known as the tokenization of real-world assets. This is believed to enhance settlement speeds, reduce operational costs, and increase transparency.
Read more: Singapore’s Central Bank explores asset tokenization with major financial firms. Follow Us on Google News.
