Tokenization and private credit
Tokenization can change how ownership and contractual claims are recorded and transferred. In private credit, the useful starting point is the underlying claim: a fund interest, a loan exposure or another right with its own payment and enforcement terms.
Separate the investment from the loan workflow
The public thesis of our private-credit report distinguishes tokenized fund interests from changes to loan-level records and servicing. A review should identify the part of the transaction that changes: investor ownership, collateral records, repayment processing or the distribution of proceeds.
The BIS describes a token as bringing asset and ownership information together with programmable rules. Its analysis also identifies legal, technical and economic obstacles. A programmable record therefore needs a clear connection to the real claim and the parties responsible for it. Read BIS Bulletin 72, April 2023.
Keep market definitions consistent
Private-credit assets under management, tokenized fund value and outstanding loan principal describe different things. Before comparing two totals, record the observation date, asset categories, valuation basis and treatment of repaid loans or overlapping vehicles. A growth rate is meaningful only when the endpoints use a comparable definition.
Trace collateral and servicing
Our proposed diligence sequence follows the loan from origination to repayment or default. Identify who verifies collateral information, who values it, how payment priority is defined and who can correct a faulty instruction. Review token transferability separately from the investor’s redemption rights.
Research and conversations
- The tokenized private credit opportunity — developed with Avalanche; focuses on investment wrappers and underlying loan operations.
- Why “DeFi is dead” and what replaces it with Sidney Powell, CEO of Maple Finance — a 51 Podcast conversation.
- The $700T blueprint, with Robert Leshner, Co-Founder and CEO of Superstate — a 51 Podcast conversation.