Blockchain-Based Private Loans Doubled in 2023
With the value of active tokenized private credit currently at $582 million, a startling 128% increase from a year ago, blockchain-based lending has regained momentum in 2023.
According to data from real-world asset loan tracker RWA.xyz, the market is still far from its peak of $1.5 billion in June 2022, but the resurgence may indicate that, in light of recent interest rate increases, borrowers are searching for blockchain-based alternatives to traditional financiers.
According to a Dec. 1 report by NerdWallet, lenders have been offering small business bank loan interest rates ranging from 5.75% to 11.91%, while the current average percentage rate for blockchain-based credit protocols is 9.64%.
The asset management company Fasanara Capital, situated in the United Kingdom, is one of the most notable borrowers of late. It obtained a $38.3 million loan from Clearpool at a base annual percentage yield (APY) of less than 7%.
Another financial player in the market is the Brazilian bank Divibank.
With $255 million in active loans, Ethereum-based Centrifuge now holds over 43% of the market, up 203% from $84 million at the beginning of 2023.
With $143 million in active loans, Goldfinch is the second-largest blockchain credit protocol, followed by Maple with $103 million.
Three of the primary cryptocurrencies used to enable these loans are USD Coin (USDC), Dai (DAI), and Tether (USDT), which are US dollar-pegged stablecoins.
The data indicates that the consumer ($197.7 million) and automotive ($186.8 million) sectors are the top sources of blockchain-based loan applicants, followed by fintech, real estate, carbon credit, and cryptocurrency trading.
The $506 million active loan market is only roughly 0.3% the size of the $1.6 trillion traditional private credit market, despite the recent increase.
There are hazards associated with obtaining loans through blockchain-based protocols, though. Potential borrowers should consider security risks such as smart contracts, collateralization, and insolvency before taking out a loan.
Sources:
https://cointelegraph.com/news/blockchain-based-private-loans-582m-doubling-from-last-year
https://www.nerdwallet.com/article/small-business/small-business-loan-rates-fees
