Cointelegraph Research examines how RWA private credit can bridge onchain capital seeking yield with SME borrowers facing funding shortages across the EU.
DeFi & Yields ·
A convergence of yield dynamics and financing constraints has created conditions for real-world asset private credit on blockchain networks. After seven rate increases in 2022, 10-year Treasury yields reached approximately 3.9% by year-end, surpassing the roughly 2.4% yields available in low-risk decentralized finance protocols. This shift eliminated the yield advantage that previously incentivized capital to remain deployed onchain.
Simultaneously, small and medium-sized enterprises across the European Union encountered severe funding pressures. New SME lending contracted by 12% in 2023, while annual unmet financing needs reached €211 billion between 2017 and 2023, with a distinct annual funding gap of €39 billion. By 2024, 7.6% of SMEs reported financial constraints. This dual market gap—onchain capital lacking attractive returns and SMEs lacking access to credit—opened an opportunity for bridging mechanisms.
Research examining private credit as a potential solution identifies the structural alignment between these two demand sides. Whether such mechanisms can effectively connect capital pools with borrower needs, and what regulatory or operational barriers may impede or enable these arrangements, remain subjects requiring further investigation. A detailed analysis explores these mechanisms in depth.