Blockchain-based lending is regaining momentum this year, with the value of active tokenized private credit now standing at $582 million, a staggering 128% increase from the previous year.
Although it is still far from its peak of $1.5 billion in June 2022, according According to data from real-world asset loan tracker RWA.xyz, the resurgence could indicate that loan seekers are looking blockchain-based alternatives to traditional financiers amid a recent rise in interest rates.
The current average percentage rate is 9.64% for blockchain-based credit protocols, while financiers have been offering interest rates for small business bank loans between 5.75% and 11.91% . according according to a Dec. 1 report from NerdWallet.
The loans that are being obtained are not small either. RWA.xyz has tracked $4.5 billion in blockchain-based loans across 1,804 deals, meaning the average loan amounts to about $2.5 million.
One of the most notable loan applicants of late is UK-based asset management firm Fasanara Capital, which secured a $38.3 million loan from Clearpool with a base APY of less than 7%.
The Brazilian bank Divibank is another financial institution that participates in the market.
Ethereum-based Centrifuge owns more than 43% of the current active loan market with 255 million dollars, 203% more than the 84 million dollars at the beginning of 2023.
Goldfinch and Maple are the second and third largest blockchain lending protocols, with $143 million and $103 million in active loans, respectively.
Tether, stablecoin pegged to the US dollar (USD), USD currency (USDC) and dai (DAI) are three of the main cryptocurrencies used to facilitate these loans.
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The largest applicants for blockchain-based loans come from the consumer ($197.7 million) and automotive ($186.8 million) sectors, followed by fintech, real estate, carbon credits and cryptocurrency trading, data shows .
Despite the recent surge, the $506 million active loan market represents about 0.3% of the size of the $1.6 trillion traditional private credit market.
However, obtaining loans through blockchain-based protocols comes with risks. Loan applicants should weigh insolvency, collateral, smart contracts and other security risks before borrowing.
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