While the tokenization of real estate and public equities has garnered significant attention, private credit - loans and debt issued by non-bank lenders - has been largely overlooked. Nevertheless, it presents a compelling opportunity for the transformation of the traditional private credit market by unlocking liquidity in non liquid markets, simplifying deal administration, reducing costs, improving investor experience and offering flexible structures with strong compliance. It has both the foundations and tremendous potential to further combine the gap between conventional finance and the future of digital markets. 

This article explains what the tokenization of private credit is, explores why it’s a suitable use case for blockchain, plus the unique value propositions and benefits that exist when tokenizing private credit on MANTRA Chain. ‍

What Is Private Credit?

Private credit refers to loans and debt instruments issued by non-bank institutions to private companies or individuals. Unlike public bonds, these loans are not traded on open markets, making them less liquid, harder to price, and often limited to institutional investors with specialized knowledge and access.

Globally, the private credit market has grown exponentially in recent years, owing to increased market volatility and bank lending regulations. At the start of 2025, the size of private credit was $3 trillion, compared to roughly $2 trillion in 2020. By 2029, it is estimated to grow to approximately $5 trillion.  

However, despite its size, the sector suffers from illiquidity, opaque documentation, and high friction in secondary trading. The use of blockchain infrastructure and subsequent tokenization sets out to address and solve for these issues.

A High Level Explainer of Tokenization 

Tokenization converts a real world financial instrument or asset into a digital token on a blockchain, thereby enabling fractional ownership, programmable rules, and automated compliance. You can read more about tokenization here. 

The tokenization of private credit, leverages several key features of blockchain;

• Fractionalization: Large loans can be split into smaller tokenized portions, opening access to a wider investor base.
• Transparency: Blockchain records provide immutable, auditable transaction history.
• Programmable Compliance: Smart contracts can enforce covenants, automate interest payments, and restrict transfers to accredited investors.
• Liquidity: Tokens can be traded on compliant secondary markets, creating opportunities for early exits or portfolio rebalancing.

Tokenizing Private Credit : Use Cases and Pros 

Private credit investments including SME loans, trade finance, or structured credit have traditionally been reserved for large institutions. 

Tokenization changes this by splitting these instruments into smaller, tradeable units, enabling participation from a broader range of investors, including family offices, accredited individuals, DAOs, and international investors. Interoperable token standards allow financial instruments to move seamlessly across systems as tokens. 

Traditionally illiquid, private credit often comes with long lock-up periods. 

Tokenization represents debt as digital tokens that can trade on compliant secondary markets, opening up future liquidity and price discovery. Investors can buy or sell portions of loans onchain, and tokens can be combined, tranched, or wrapped into new products such as stablecoin-backed yield instruments or DeFi lending pools.

Tokenization also addresses key compliance and regulatory challenges. 

Onchain identities, verified credentials, and blockchain-based KYC/AML systems ensure investor records are private, traceable, and auditable. Smart contracts embed regulatory obligations, such as whitelisting, transfer restrictions, and jurisdictional rules, directly onto the tokens, replacing document-heavy, post-trade checks.

Data fragmentation in private credit has long hindered transparency and valuation. 

Onchain records unify loan terms, performance, ownership, and investor positions into a single source of truth accessible to authorized parties. Real-time updates replace quarterly reporting, reduce operational risk, and enable continuous monitoring, accurate valuations, benchmarking, and richer analytics.

The Benefits of Tokenizing Private Credit with MANTRA and On MANTRA Chain 

MANTRA Chain is the first true MultiVM Layer 1 built for real world assets, supporting both EVM and CosmWasm smart contracts. This architecture enhances security and scalability while allowing developers and institutions to use familiar tools, making it easier to bring traditional assets, like private credit, onchain and provide global investors with transparent access.

With MANTRA Finance’s VASP license from Dubai’s VARA, the chain can compliantly serve the growing tokenization market. Institutions can integrate seamlessly, meeting regulatory requirements across multiple jurisdictions.

MANTRA’s decentralized identity (DID) system enables secure, reusable KYC/AML verification, simplifying the issuance and scaling of regulated credit products while reducing compliance costs.

The network is secured by a sovereign cohort of institutional validators - including Google Cloud, Anchorage Digital, Nansen and Ledger - offering institutional clients secure custody, staking, and confidence in network integrity.

The Last Word 

Tokenizing private credit represents a global paradigm shift in how debt is issued, traded, and managed. 

By creating liquidity, increasing transparency, and embedding compliance into programmable contracts on infrastructure that regulators can trust, private credit tokenization will unlock trillions of dollars in a previously illiquid asset class, broadening access to capital for both borrowers and investors.

Enquiries about tokenizing private credit on MANTRA Chain can be submitted here.