Blockchain-Based Private Credit Surges 55% as Companies Seek Financing Amid Rising Interest Rates
More companies are turning to blockchain-based private credit as they seek financing amid increasing interest rates, leading to a significant surge in this sector.
According to RWA.xyz, a platform that tracks debt, active private loans through digital ledgers have risen by 55% since the beginning of 2023, reaching approximately $408 million as of November 28th.
Although this figure is lower than the peak of nearly $1.5 billion reached in June of the previous year, it still represents a notable revival.
However, it should be noted that this amount is just a fraction of the $1.6 trillion traditional market for private credit.
One of the key advantages of blockchain-based private credit is the potential for lower borrowing costs.
While interest rates can vary depending on the specific deal, some blockchain protocols charge less than 10%, compared to the double-digit rates sought by traditional providers in the current market environment.
“Increased transparency and liquidation mechanisms onchain have reduced the risk of lending,” said Agost Makszin, co-founder of Lendary (Asia) Capital, an alternative investment management group, told Bloomberg .
“This has likely resulted in lower borrowing rates compared with traditional private credit, which is often slower and has a longer liquidation process.”
Traditional private credit has faced criticism for being too opaque, with concerns raised by industry players such as Pimco and the European Central Bank.
However, this sector has seen significant growth since 2015, providing loans for smaller companies, buyout financing, real estate, and infrastructure projects.
Investors are increasingly seeking exposure to this asset class.
In the blockchain version of
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