According to CoinDesk, Credbull, a crypto startup, is set to launch its first private credit fund, aiming to provide investors with access to the high-yield lending markets that are gaining popularity in traditional finance. The fund is part of a wider trend of maturation in the decentralized finance (DeFi) lending sector, which has previously been restricted to decentralized exchanges and stablecoin applications.
Credbull's initial product replicates the core of private credit, but on crypto rails. Investors participate by using the stablecoin USD Coin (USDC). Credbull then converts the USDC to dollars via Circle and passes the money to SME originators, the debt financing companies that lend to other businesses. The high yield targets of the funds are partly due to its on-chain structure, which reduces administrative costs by up to 150 basis points.
In the private credit sector, small- and mid-sized businesses in need of financing obtain their funds from specialized lenders rather than banks. These deals have grown into a $1.7 trillion market, according to Bloomberg, competing with banks and appealing to investors who are willing to lock their money for years in return for strong returns.
Credbull's fund also introduces a unique crypto twist. Its investor community will have a say in governing the fund's risk profile and will have transparency into how their money is managed. The fund has a six- to 12-month lockup, a much shorter timeframe than traditional private credit investors are accustomed to. It aims to pay fixed yields as high as 10% for longer-term investors, plus 10% of the upside generated by the fund, targeting returns of 18-20%.
Credbull's entry signifies a broader professionalization of crypto's credit markets. The company behind the lending protocol Goldfinch recently launched an SEC-registered investment advisory that channels private credit deals through its on-chain portal. Credbull's fund is registered in the Bahamas and is claimed to be the first licensed on-chain private credit fund, with operations expected to commence in May.
