Private credit at the forefront of tokenization—Sydney Powell envisions the future of financial innovation

As the digital transformation of the financial industry accelerates, Mr. Sidney Powell of Maple Finance is paying close attention to the tokenization of the private credit market. While many discussions focus on the tokenization of government securities and money market funds as cryptocurrencies, Mr. Powell argues that the private lending market—where traditional financial institutions are withdrawing—is the ideal field to realize the true potential of blockchain technology.

Accelerating Private Credit Market Due to Bank Withdrawals

The private credit market is already entering a structural growth trend. As traditional banks retreat from lending activities, private equity firms, credit investment funds, and institutions like Apollo are rapidly increasing their presence. According to Mr. Powell, this trend is expected to accelerate over the next few years, with new capital providers reshaping the entire market.

However, this market faces serious challenges different from those of publicly traded stocks or open-end funds. Extreme liquidity constraints, opaque price discovery mechanisms, and incomplete reporting systems for investors cloud market participants’ decision-making.

Three Improvements Brought by Tokenization—Liquidity, Transparency, Price Discovery

The “tokenization” Mr. Powell refers to is the process of representing real-world assets (in this case, private credit) as digital tokens on a blockchain. This technological shift offers improvements beyond mere efficiency.

First, liquidity enhancement: Currently, private credit is limited to over-the-counter bilateral markets, making sales extremely difficult. Tokenization on-chain would accelerate secondary market trading, allowing investors to dispose of their assets when needed.

Second, transparent price discovery: In a fragmented information environment, proper price formation is difficult. If all transaction histories are recorded on the blockchain through tokenization, the true market price will become clearer.

Third, strengthened reporting systems: From borrowing to repayment or default, the entire loan lifecycle will be recorded in an auditable manner. This dramatically improves investors’ risk visibility.

Why Private Credit Is Optimized for Tokenization

Major asset management firms like BlackRock and Franklin Templeton are already advancing the tokenization of money market funds. These on-chain funds provide investors with exposure to short-term government debt with daily liquidity, demonstrating efficiency in settlement and transparency in record-keeping.

However, Mr. Powell emphasizes the relative convenience of private credit compared to stocks and standard funds. In stock markets, fees are already approaching zero, and the marginal gains from tokenization are minimal. Conversely, private credit faces fundamental structural issues—lack of liquidity, opaque pricing, and fragmented information—that tokenization can directly address.

He states, “Markets where information is fragmented and asset transfers are difficult are precisely where tokenization’s true value is realized.” Private credit is a bilateral negotiation market with often limited reporting. Moving toward on-chain solutions in this environment will significantly enhance market transparency, enable broader investor participation, and substantially reduce transaction costs in secondary trading.

On-Chain Market Defaults—Not a Bug, but a Feature

In the private credit sector, loan defaults and adverse impacts on lenders are commonplace. For example, in September 2025, the bankruptcy protection of First Brand, an auto parts manufacturer, was triggered by the discovery of complex, undisclosed off-balance-sheet liabilities—an event that exemplifies opacity in this sector. Many private lenders suffered unexpected losses, affecting the entire market.

In response, Mr. Powell advocates for a “defense through transparency.” In an on-chain system, even when defaults occur, the entire loan lifecycle is transparently recorded, making fraudulent activities like double collateral much harder to execute.

Crucially, defaults in on-chain markets are not “bugs” but “features.” He explains, “Problems that occur can be managed on-chain, which greatly reduces fraud risk.” In traditional opaque markets, signs of stress can go undetected for long periods and then rapidly spread. On the blockchain, all parties have access to the same information source, and all transactions are recorded in an auditable manner, enabling early detection and response.

On-Chain Ratings and Mainstream Investor Entry

Mr. Powell predicts that as the on-chain lending market matures, crypto-backed loans will be rated by traditional credit rating agencies. He suggests that by the end of 2026, these digital asset-based financial products could receive formal credit ratings.

This development would allow institutional investors—pension funds, insurance companies, asset managers, and government funds—who manage the largest balance sheets, to incorporate on-chain financial products into their investment mandates for the first time. If these are classified under the same standards as existing frameworks for corporate and sovereign credit—moving from “investment-ineligible” to “investment-grade” assets—funds from institutional players will increasingly flow into tokenized private credit markets.

Macro Environment and Bitcoin—Inflation and Debt Burden Perspectives

It’s also worth noting Mr. Powell’s long-term outlook on the macroeconomic environment. With hundreds of trillions of dollars in national debt accumulated and balanced budgets politically difficult, governments are left with taxation or inflation as options. He points out that inflation acts as an “effective tax on purchasing power,” and in such an environment, Bitcoin as a fixed-supply asset will be supported.

While policymakers are working toward deregulation and expanding supply-side economic policies, structural debt overhang remains a tailwind for real assets.

Yield Pursuit and Institutional Investor Trends

Finally, Mr. Powell believes that capital inflows into private credit markets from institutions will not cease. Pension funds, insurance companies, asset managers, and government funds—largest capital allocators—have an inherent need to seek yield. As institutional adoption of Bitcoin progresses, these investors will increasingly turn their attention to tokenized private credit markets.

His analysis suggests that technological evolution and macroeconomic shifts could transform traditional bilateral over-the-counter markets into entirely new ecosystems. If transparency, liquidity, and credit ratings are simultaneously implemented, private credit could evolve into the fastest-growing category of tokenized assets.