Why Private Credit Is Moving Onchain — And What DeFi Gets Right and Wrong About It

Private credit backed by receivables rather than long-duration loans is the structural feature that makes Fastenera's approach compatible with DeFi deployment. Its flagship fund holds approximately 300,000 positions across 45 countries, with an average loan duration of 100 days or fewer, an average position size of 0.03 basis points of NAV, and has never posted a down month since inception. David Vachev argues that short duration and extreme granularity are not incidental features but the precise conditions that allow private credit to function on-chain without creating new liquidity mismatches.

The tokenized product built around Fastenera's receivables fund is M Global, backed by approximately 700,000 assets and carrying a five-week redemption period. Infinifi became the anchor investor after requesting tokenization through Midas and currently holds a 30 million dollar position yielding approximately 7.25 to 7.75 percent. Crypto-native duration yields have compressed significantly over the past year, making off-chain sources like M Global the largest remaining scale of duration yield accessible on-chain. Noon, represented by Arpen Gotem, initially deployed into T-bills and funding rate arbitrage but found those strategies cyclical and unsustainable in down markets, which led the team to seek counter-cyclical alternatives and ultimately to Fastenera. Approximately 60 percent of the entire Noon protocol is currently allocated to Fastenera's F-TAT fund.

The redemption architecture each protocol built around Fastenera's fund differs meaningfully. Infinifi used a borrow-short lend-long structure with duration depositors and liquid depositors, laddering capital across one-week, four-week, and up to thirteen-week assets, with liquid depositors retaining near-instant access most of the time while earning above-liquid rates. Noon's internal liquidity targets require 20 percent of TVL liquid within 24 hours, 60 percent within three days, and 100 percent within five days, achieved through multi-party agreements where counterparties bear exit duration risk without haircuts to users. Midas tokens now feature approximately four layers of liquidity including atomic liquidity, structured liquidity within Midas, secondary market liquidity, and an OTC facility, reflecting how the original 35-day redemption window proved insufficient and required additional structural additions.

The First Brands Group Chapter 11 filing in September 2025 became a significant stress test for private credit broadly, involving alleged fraudulent invoices, double pledging, and fabricated receivables. First Brands was one of Fastenera's larger loan book concentrations, and because the assets were receivable-backed, the fraud caused collateral value to disappear, meaningfully increasing loss given default. Despite this, the fund posted a positive return in the month the event hit the numbers. Fastenera's 80 percent advance rate provides a first-loss buffer, with credit insurance and originator structural enhancements adding further protection. David's conclusion is that fraudulent practices are inherent in private credit and cannot be fully eliminated, and that portfolio durability through granularity rather than avoidance of credit events is the correct framework for private credit on-chain.

Major traditional private credit managers including Blue Owl, BlackRock, and Apollo have had to cap redemptions because they marketed longer-duration products to retail investors who redeem quickly during downturns, creating mismatches that funds holding one-to-seven-year loans cannot absorb. Fastenera's investor base is predominantly insurance funds and pension funds with no direct retail exposure, and those investors understand asset-liability mismatch, which Arpen credits as the reason Fastenera avoided significant simultaneous exits during the same period. Gates in private credit funds exist for structural reasons, and selling illiquid private market assets to retail at the wrong price forces all investors to bear the consequences.

David frames the case for tokenization around composability, programmability, and accessibility, and estimates that approximately 0.25 percent of all real-world assets and financial securities have been tokenized, indicating a large remaining opportunity. He warns that tokenizing something illiquid while offering daily liquidity creates a new form of liquidity mismatch, and that private market assets lack a listed market price, making NAV opacity a structural feature rather than purely a governance failure. Tokenization only adds value when the asset benefits from improved settlement, transparency, transferability, collateral utility, or investor accessibility, and whether an asset works on-chain depends on deliberate structural design choices rather than technical possibility alone.

A core tension in on-chain private credit is applying DeFi's expectation of radical transparency to portfolios containing hundreds of thousands of individual loan positions. Arpen argues that tokenizing only the receipt token or fund shares is insufficient without visibility into downstream credit positions, and that achieving meaningful transparency at that scale requires infrastructure built from the ground up. Accountable addresses part of this by giving verifiers direct access to custodial balances so off-chain asset claims can be confirmed without the asset manager's interference. Arpen draws a sharp distinction between transparency and credit quality, pointing to the 2022 on-chain private credit failures as cases where losses were fully visible but underlying credit underwriting was weak, and argues the next phase of tokenized private credit must move beyond wrapping fund shares toward full infrastructure integration with viable on-chain use cases.