Educational Disclaimer: This content is strictly for educational and research purposes and does not constitute financial, investment, or legal advice. Private credit involves credit, liquidity, legal, and smart contract risks, including the possible loss of principal. Always conduct independent due diligence.
About the Author: Written by redpakpak, an independent research initiative focused on on-chain risk analysis, DeFi mechanisms, and tokenized real-world asset structures.
Tokenized U.S. Treasuries have become the on-chain benchmark for low-risk yield. But when a different product advertises a much higher rate, the obvious question is: where does that extra yield come from?
In most cases, the answer is private credit, loans made to businesses outside the banking system. This guide compares tokenized private credit with tokenized Treasuries, explains how the higher yield is produced, and walks through real defaults that show what that yield is paying for.
New to the topic? Start with RWA: What Is It & How Does It Work? and our tokenized U.S. Treasuries guide.
1. What is tokenized private credit?
Private credit means loans made by funds and other non-bank lenders directly to companies. Borrowers range from fintech lenders and trade finance firms to small and mid-sized businesses that cannot easily borrow from banks.
Tokenized private credit brings this lending on-chain. Investors deposit stablecoins into a pool managed through smart contracts. An underwriter, sometimes called a pool delegate or credit manager, decides which borrowers receive loans. The loan agreements themselves live off-chain, usually held through a legal entity such as a special purpose vehicle (SPV).
Protocols such as Centrifuge, Maple Finance, and Goldfinch have hosted these pools. Their track records, covered below, are the best way to understand the risks.
How large is the market? Estimates vary widely. Depending on whether a tracker counts only tokens issued on public chains or all active loans recorded on-chain, mid-2026 figures range from roughly $5 billion to nearly $19 billion. Treat any single headline number with caution and check the methodology on trackers such as RWA.xyz.
2. Private credit vs. tokenized Treasuries
| Feature | Tokenized U.S. Treasuries | Tokenized private credit |
|---|---|---|
| Who is the borrower? | The U.S. government | Private companies, often non-bank lenders |
| Where yield comes from | Short-term government interest rates | Interest paid by borrowers, including a premium for credit risk |
| Main risk | Interest rate changes, custody and platform risk | Borrower default, fraud, and recovery risk |
| Liquidity | Short maturities; many products offer frequent redemptions | Fixed loan terms; withdrawals can be delayed or locked |
| Who decides quality? | Mostly market and government credit | The underwriter’s due diligence |
| Illustrative yield | About 3.4–3.6% (major products, August 2026) | Higher; for example, an 11% annual rate on a 2022 Goldfinch loan |
The table shows the core trade-off. Treasuries pay for time. Private credit pays for time and for the chance that a borrower does not pay back.
3. Where on-chain yield really comes from
Private credit yield is not created by token incentives or protocol emissions. It is interest paid by real borrowers. Three pieces determine how much of it reaches investors:
- The risk premium. Borrowers who cannot access cheap bank loans pay higher rates. The gap between that rate and the Treasury rate is compensation for the risk of default.
- Underwriting. A credit manager reviews the borrower’s finances, collateral, and cash flow. On-chain investors usually rely on this judgment rather than verifying loans themselves.
- Tranches. Many pools split investors into layers. When repayments come in, the senior tranche is paid first and earns a lower rate. The junior tranche is paid after and earns more, but it absorbs losses first if a borrower defaults.
A higher advertised rate usually means more risk, a more junior position, or both. It rarely means a free improvement over Treasuries.
4. Real defaults: what the yield is paying for
On-chain private credit has a public default history. These cases are useful because they show how losses actually happen.
Case 1: Maple Finance and Orthogonal Trading (2022)
In December 2022, trading firm Orthogonal Trading defaulted on about $36 million of loans on Maple Finance after its funds were caught up in the collapse of the FTX exchange. Maple said the borrower had misrepresented its exposure. The default affected roughly 30% of active loans on the protocol at the time.
Lesson: Undercollateralized lending depends on borrowers reporting honestly. When a borrower hides losses, smart contracts cannot detect it in time.
Case 2: Goldfinch’s loan book (2023–2026)
Goldfinch lent to businesses in emerging markets and to credit funds. Several loans went wrong:
- Tugende (Kenya): A $5 million loan was written down after the borrower moved $1.9 million to a subsidiary in breach of the loan agreement.
- Stratos (U.S.): Of a $20 million, 11% loan, about $7 million was impaired after the borrower’s own investments failed. The underwriter said it had not been told about one of those investments.
- Lend East (Singapore): Repaid about $4.25 million of a $10.15 million loan in 2024.
In June 2026, Goldfinch announced an orderly wind-down of Goldfinch Prime and moved the protocol into maintenance mode.
Lesson: On-chain transparency covers the pool, not the borrower’s business. Recovering money from a struggling company happens off-chain, through lawyers and courts, and it can take years.
How a default unfolds on-chain
Protocols define their own rules, but the pattern is similar. Goldfinch’s documented process, for example, gives a borrower a grace period after missed payments, then marks the loan as defaulted and gradually writes down its value. Any later recoveries flow to senior investors first, then to junior investors.
5. Risk checklist for on-chain private credit
- Underwriter track record. Who approves the loans, and how have their past loans performed?
- Collateral. Is the loan secured by assets, and can those assets actually be seized in the borrower’s country?
- Your tranche. Are you senior or junior? Who takes the first loss?
- Concentration. How much of the pool depends on one borrower?
- Liquidity terms. When can you withdraw, and what happens if many investors want out at once?
- Reporting. How often do borrowers report, and is anything independently verified?
- Legal structure. Is the SPV bankruptcy-remote, and which courts decide recovery? Our DeFi & RWA risk guide covers this in more detail.
- Eligibility. Many private credit products are limited to verified or accredited investors in certain countries.
6. Summary
- Tokenized Treasuries earn government interest rates. Tokenized private credit earns interest from private borrowers, plus a premium for default risk.
- The extra yield is compensation for risk, not a free upgrade.
- Real defaults, such as Orthogonal Trading on Maple and several Goldfinch loans, show that losses come from borrower behavior off-chain.
- Before comparing rates, compare underwriters, tranches, collateral, and withdrawal terms.
Private Credit vs. Tokenized Treasuries: FAQ
Why does tokenized private credit pay more than tokenized Treasuries? Because the borrowers are private companies that may fail to repay. The higher rate compensates lenders for that risk and for locking up capital longer.
Can I lose money in tokenized private credit? Yes. Borrower defaults have caused real losses on several protocols, and recovery through courts can be slow and partial.
Does putting a loan on the blockchain make it safer? Not by itself. Tokenization makes pool activity visible, but the borrower’s business and the legal claim remain off-chain.
What is the difference between senior and junior tranches? Senior investors are repaid first and earn less. Junior investors earn more but absorb losses first.
How big is the tokenized private credit market? Mid-2026 estimates range from about $5 billion to nearly $19 billion, depending on what each tracker counts.
References
- The Block: Orthogonal Trading defaults on $36 million of loans on Maple Finance (Dec 2022)
- The Defiant: Goldfinch writes down $7M of $20M Stratos loan (Oct 2023)
- Cryptopolitan: Goldfinch winds down Goldfinch Prime (June 2026)
- Goldfinch Docs: Default Process
- RWA.xyz: Tokenized asset market data
Notice: This research analysis is strictly educational. RedPakPak does not offer investment, financial, or legal advice, nor does it endorse any protocol or product.