Disclaimer: Information found on CryptoreNews is those of writers quoted. It does not represent the opinions of CryptoreNews on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoreNews covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.
Blockchain-based lending is experiencing a revival this year, with the total value of active tokenized private credit currently at $582 million — an impressive 128% increase compared to the previous year.
Although it remains significantly below its peak of $1.5 billion in June 2022, data from real-world asset loan tracker RWA.xyz indicates that this resurgence may suggest that borrowers are seeking blockchain-based options as alternatives to conventional lenders in light of a recent uptick in interest rates.
The average percentage rate for blockchain-based credit protocols stands at 9.64%, while traditional financiers are providing small business bank loan interest rates ranging from 5.75% to 11.91%, as reported by NerdWallet on December 1.
The loans being issued are substantial as well. RWA.xyz has recorded $4.5 billion in blockchain-based loans across 1,804 transactions, resulting in an average loan amount of approximately $2.5 million.
Among the notable loan-seekers recently is the United Kingdom-based asset management firm Fasanara Capital, which secured a $38.3 million loan from Clearpool at a base APY of under 7%.
Brazilian bank Divibank is another financial entity active in this market.
Active loans market from blockchain-based protocols since October 2020. Source: RWA.xyz
Ethereum-based Centrifuge commands over 43% of the current active loans market with $255 million, reflecting a 203% increase from $84 million at the beginning of 2023.
Related Posts
Goldfinch and Maple rank as the second and third largest blockchain credit protocols, with $143 million and $103 million in active loans, respectively.
Stablecoins pegged to the United States dollar, such as Tether (USDT), USD Coin (USDC), and Dai (DAI), are among the primary cryptocurrencies utilized to facilitate these loans.
Related: Making crypto lending mainstream: How this platform breaks DeFi barriers
The largest borrowers in the blockchain-based loan market are from the consumer ($197.7 million) and automotive ($186.8 million) sectors, followed by fintech, real estate, carbon credit, and cryptocurrency trading, according to the data.
Active loans market by sector from blockchain-based protocols. Source: RWA.xyz
Despite the recent growth, the $506 million active loan market represents only about 0.3% of the $1.6 trillion traditional private credit market.
However, obtaining loans through blockchain-based protocols carries inherent risks. Borrowers should consider factors such as insolvency, collateralization, smart contracts, and other security concerns prior to borrowing.
Magazine: Home loans using crypto as collateral: Do the risks outweigh the reward?
