DeFi Builds a Credit Layer Around Tokenised Assets

From representation to financing

The clearest structural movement in DeFi was the expansion of tokenised assets from investment products into working collateral. The sector is increasingly building the lending, custody and settlement infrastructure needed to use equities, funds and other offchain claims within onchain credit markets.

Morpho introduced borrowing against Coinbase's tokenised stocks, while Kraken launched vaults for loans secured by tokenised equities and added DeFi yield to tokenised stocks and exchange-traded funds. Aave Labs outlined a credit market for tokenised assets on Avalanche, and Compound launched an institutional-only market with an 87% loan-to-value ratio. Nomura's Laser Digital also entered DeFi fixed income through Euler.

These developments matter because borrowing turns tokenisation from a representation layer into balance-sheet infrastructure. A tokenised security that can be pledged, financed and liquidated has greater utility than one limited to spot trading. Reported trading of $1 billion in tokenised stocks while conventional exchanges were closed provides separate evidence of demand for continuous markets, although trading volume does not establish sustained borrowing demand.

The change is more functional than purely quantitative. During the preceding period, real-world assets were already resisting a broader DeFi slowdown, and Centrifuge connected a liquidity network to $1.6 billion of managed funds. Yet tokenised gold's limited use as collateral — reported at less than 2% of supply — illustrated the gap between putting assets onchain and integrating them into financial activity. The current period brought a more direct effort to close that gap.

A modular institutional stack

Institutional participation is not taking the form of an unqualified move into open, permissionless pools. Instead, the emerging model separates regulated access and custody from onchain execution.

Compound's institutional market, the proposal to connect Aave with Anchorage custody and Circle's use of Morpho for Bitcoin-backed USDC borrowing all fit this modular structure. Traditional or regulated firms can control customer access and custody while established DeFi protocols provide lending logic, liquidity and settlement.

The same pattern is visible beyond credit. Ondo's integration with the DTCC's Fund/SERV network links tokenised products to established fund-processing infrastructure. WisdomTree distributed a tokenised Treasury fund through MoonPay, while Kamui Finance launched institutional real-world asset vaults connected to several specialist providers. Circle's Arc network began operating with BlackRock, DTCC and Visa participating in block production.

This does not amount to the displacement of conventional finance by DeFi. It points instead to selective use of onchain protocols as financial middleware. The likely competitive advantage shifts from launching another token or blockchain towards controlling distribution, custody relationships, risk parameters and access to credible collateral.

Risk is transferred, not removed

The build-out of onchain credit also makes the quality of collateral and liquidation design more consequential. An 87% loan-to-value ratio leaves a relatively narrow initial buffer against adverse price movements. Tokenised equities can trade continuously even when their underlying markets are closed, creating the possibility of temporary price divergence and more difficult oracle or liquidation conditions.

Recent stress in NUSD provides a direct warning. Redemptions were paused during the preceding period over a reserve issue; in the current window, redemptions began at 51 cents amid difficulties involving the Strata junior tranche. The episode shows that tokenised claims remain exposed to reserve composition, subordination and redemption liquidity. Moving those claims onchain can improve transferability and transparency, but it does not make the underlying credit risk disappear.

Technical and governance risks also remained material. Term Finance suffered an estimated $8.5 million vault governance exploit, an rsETH exploit involved $7.8 million, and a More Markets lending reserve was reportedly drained of $410,000. These incidents involved different mechanisms, but together underline the broader requirement for stronger controls as higher-value collateral enters DeFi.

Legal rights are another unresolved variable. Disagreement over an AMC stock token, proposals to attach shares and voting rights to stock tokens, and debate over whether issuer consent should be required demonstrate that products carrying similar market exposure may not confer identical ownership rights. Collateral models will need to account for those differences rather than treating all tokenised securities as interchangeable.

Expansion is occurring alongside attrition

The growth of institutional products coincided with continued pressure on weaker or less differentiated infrastructure. Balancer considered a shutdown and distribution of its $9 million treasury after restructuring efforts failed to restore revenue. Full Sail ceased operations following an infrastructure incident, while several networks announced or proposed sunsets and token migrations.

These events do not establish a sector-wide contraction, but they show that activity alone is insufficient. Robinhood Chain reported record trading volume while revenue remained 83% below its peak, illustrating the distinction between transaction growth and durable value capture. DeFi's institutional expansion may therefore favour a smaller group of protocols able to combine liquidity, risk management and distribution partnerships.

Outlook

The next test is utilisation rather than product availability. Borrow balances against tokenised securities, collateral haircuts, liquidation performance and redemptions at par will provide stronger evidence than launches alone. Sustainable protocol revenue will also matter, particularly where regulated distributors retain the customer relationship.

The US policy backdrop remains unsettled. The Senate blocked the CLARITY Act, while the SEC and CFTC continued separate rulemaking work and custody proposals remained under review. Product development proceeded in parallel, but the final operating boundaries for tokenised securities and institutional DeFi remain subject to regulatory decisions.

Compared with the preceding period, the direction of travel is clearer: real-world assets are being designed for use inside credit markets, not merely held in wallets. Whether that becomes a durable source of DeFi growth will depend on collateral performance under stress, enforceable investor rights and evidence that these new markets can generate repeat borrowing rather than launch-driven activity. The comparison is directional and event-based because source coverage in the preceding period is narrower.