Is Tokenizing Private Credit Actually Worth It?

Private credit has grown into a major part of the alternative investment landscape, and now there’s increasing discussion around putting private credit instruments on-chain.

The pitch sounds compelling: tokenization could potentially make ownership records more efficient, automate parts of settlement and compliance, and create new ways to distribute private-market investments to eligible investors.

But I’m wondering where the real economic value is.

For example, suppose a private credit fund or loan is tokenized. You still have many of the same underlying requirements:

• Credit underwriting

• Legal documentation

• Servicing

• Investor eligibility

• KYC/AML

• Custody

• Valuation

• Reporting

• Default management

• Regulatory compliance

Putting the ownership record on a blockchain doesn't eliminate those processes.

So what actually changes?

One potential advantage is transferability. If there is a regulated secondary market for tokenized private credit, investors could potentially have more flexibility around transferring their interests.

But that raises another question: Does tokenization create liquidity, or does liquidity need to exist before tokenization becomes valuable?

There’s also an infrastructure question.

Would asset managers be better off building their own tokenization infrastructure, partnering with a specialist provider, or using a white-label platform?

From an investment-banking, PE, private-credit, or asset-management perspective, I'd be interested in hearing how people would evaluate the business case.

What would make tokenized private credit materially better than the existing infrastructure?

Is it primarily:

• Lower settlement and administration costs?

• Better investor distribution?

• Secondary-market liquidity?

• Automated compliance?

• Faster onboarding?

• Better transparency?

• Or is the main benefit still theoretical?

Curious to hear from anyone who has worked on private-credit tokenization or evaluated it from an institutional perspective.