Written by: Prathik Desai
Compiled: Block unicorn
Preface
On tokenized real-world asset (RWA) platforms, private credit is at the forefront. Over the past year, tokenized private credit has been the fastest-growing category, scaling from less than 50,000 USD to approximately 2.4 billion USD.
If we exclude stablecoins (whose payment channels cover all on-chain activities), the ranking of tokenized private credit is second only to on-chain commodities. Top tokenized commodities include Tether and Paxos's gold-backed currency, as well as Justoken's cotton, soybean oil, and corn-backed tokens. This seems to be a serious category, with real borrowers, cash flows, underwriting mechanisms, and yields, and it is less dependent on market cycles compared to commodities.
But the story only becomes complex when dug deeper.
This $2.4 billion in outstanding tokenized private credit accounts for only a small fraction of the total outstanding loans. This indicates that only a portion of the assets can truly be held and transferred on-chain through tokens.
In today's article, I will examine the realities behind the numbers of tokenized private credit and what these numbers mean for the future of this category.
Let's get straight to the point.
The dual face of tokenized private credit
The total active loan amount on the RWA.xyz platform is slightly above $19.3 billion. However, only about 12% of the assets can be held and transferred in a tokenized form. This reflects the dual nature of tokenized private credit.
On one side is 'representative' tokenized private credit, where the blockchain merely provides operational upgrades by establishing a registry of outstanding loans sourced from the traditional private credit market on-chain. On the other side is the distributable upgrade, where blockchain-driven markets coexist with traditional (or off-chain) private credit markets.
The former is used only for recording and reconciliation, documented in a public ledger. Meanwhile, distributed assets can be transferred into wallets for transfer.
Once we understand this classification system, you will no longer ask whether private credit is on-chain. Instead, you will pose a sharper question: how much private credit assets originate from the blockchain? The answer to this question might enlighten us.
The development trajectory of tokenized private credit is encouraging.
Until last year, almost all tokenized private credit was merely an operational upgrade. Loans already existed, borrowers were repaying on time, platforms were functioning normally, and the blockchain was just recording these activities. All tokenized private credit was simply recorded on-chain and could not be transferred as tokens. Within a year, the share of transferable on-chain assets has risen to 12% of the total traceable private credit volume.
It showcases the growth of tokenized private credit as a distributable on-chain product. This allows investors to hold fund shares, liquidity pool tokens, notes, or structured investment exposure in token form.
If this distributed model continues to expand, private credit will no longer resemble a loan ledger, but rather an investable on-chain asset class. This shift will change the earnings that lenders receive from transactions. In addition to returns, lenders will gain a tool with higher operational transparency, faster settlement speeds, and more flexible custodianship. Borrowers will obtain funding that does not rely on a single distribution channel, which could be beneficial in a risk-averse environment.
But who will drive the growth of the distributable private credit market?
Figure Effect
Currently, the majority of outstanding loans come from a single platform, while other parts of the ecosystem constitute a long-tail effect.
Since October 2022, Figure has been monopolizing the tokenized private credit market, but its market share has fallen from over 90% in February to the current 73%.
But what’s more interesting is Figure’s private credit model.
Although the scale of tokenized private credit has now exceeded $14 billion, all the value of this industry leader is reflected in the value of 'representative' assets, while the distributed value is zero. This indicates that Figure’s model is an operational pipeline that records loan issuance and ownership traceability on the Provenance blockchain.
Meanwhile, some smaller participants are driving the distribution of tokenized private credit.
Figure and Tradable hold all their tokenized private credit as representative value, while Maple’s value is entirely distributed through the blockchain.
From a macro perspective, the vast majority of the currently active $19 billion on-chain loans are recorded on the blockchain. However, the trend over the past few months is undeniable: an increasing amount of private credit is being distributed via blockchain. Given the enormous growth potential of tokenized private credit, this trend will only intensify.
Even with a scale of $19 billion, RWA currently accounts for less than 2% of the total $16 trillion private credit market.
But why is 'movable, rather than just recorded' private credit important?
Movable private credit offers more than just liquidity. Gaining private credit exposure through tokens outside the platform provides portability, standardization, and faster distribution speed.
Assets obtained through traditional private credit channels can trap holders within the ecosystem of a specific platform. Such ecosystems have limited transfer windows, and secondary market trading processes are cumbersome. Additionally, negotiations in the secondary market also progress slowly and are primarily led by professionals. This gives the existing market infrastructure far greater power than asset holders.
Distributable tokens can reduce these frictions by enabling faster settlements, clearer ownership changes, and simpler custodianship.
More importantly, 'movability' is the prerequisite for achieving large-scale standardized distribution of private credit, which has historically been lacking in private credit. In traditional models, private credit appears in forms like funds, Business Development Companies (BDCs), and Collateralized Loan Obligations (CLOs), each of which adds multiple layers of intermediaries and opaque fees.
On-chain distribution provides a different path: programmable wrappers enforce compliance (whitelisting), cash flow rules, and information disclosure at the tool level rather than through manual processes.
That’s all for today’s content; see you in the next article.