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- Private credit experienced a notable surge of 55% this year amid elevated interest rates.
- Although crypto loans have risen to around $581 million, they remain below last year’s peak of nearly $1.5 billion.
- Blockchain protocols charge less than 10% for crypto loans, while traditional providers seek double-digit rates.
Crypto-based loans have experienced a notable rebound of over 55% in 2023 as companies increasingly turn to blockchain-based financing amid elevated interest rates. The development was captured in a recent report by Bloomberg, noting that the resurgence marks a partial recovery from the crypto sector’s 2022 downturn.
Citing data from RWA.xyz, a market intelligence platform monitoring on-chain protocols, the report noted that active private loans on blockchains had risen to $408 million by November 28. By press time, that figure had grown to approximately $581 million, per the latest numbers on RWA.xyz’s web app. The figure reflected the substantial growth since the beginning of the year.
Meanwhile, the new record for crypto-based lending remains below the peak of nearly $1.5 billion witnessed last June. Besides, it represents only a fraction of the traditional private credit market, which boasts a $1.6 trillion valuation.
According to data from RWA.xyz, certain blockchain protocols charge less than 10% for crypto loans. In contrast, traditional providers seek double-digit rates in the current economic environment.
Notably, advocates of crypto ledgers argue that they enhance transparency in deals and repayments, given that blockchains are open to public scrutiny. They assert that software, known as smart contracts, can actively monitor for stress and autonomously initiate actions such as recalling loans or collateral. Agost Makszin, the co-founder of Lendary (Asia) Capital, emphasized this view, stating:
Increased transparency and liquidation mechanisms on-chain have reduced the risk of lending. This has likely resulted in lower borrowing rates compared with traditional private credit, which is often slower and has a longer liquidation process.
According to data from RWA.xyz, most active loans by value are concentrated in the consumer ($197.7M), auto ($186.8M), and fintech sectors ($105.2M). Real estate, carbon projects, and crypto trading follow closely in terms of loan value distribution.
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