On Chain Capital Meets Off Chain Credit

Part 2: How TradFi Solves It

TradFi solves the mismatch with three mechanisms that work together. Each one hands the asset to a different pool of capital with different liability duration. The chain is what makes long dated origination possible at scale.

Part 3: How DeFi Has Tried to Solve It

DeFi (decentralized finance, lending and trading protocols that run on public blockchains without an intermediary) has tried the duration mismatch with fixed maturity debt tokens. The borrower locks capital for a defined term, gets a token redeemable for principal plus interest at maturity, and the lender can sell the token early if they need cash. The idea works on paper. The practice has not.

What's On Chain Today

Sources: notional.finance dashboard (May 2026); DefiLlama protocol stats; CoinDesk reporting on Goldfinch Stratos default (Oct 2023), TrueFi Blockwater default (Oct 2022).

Pure on chain fixed maturity credit has not scaled. Pendle looks like an exception at $8 billion TVL, but the demand is users farming points and trading yield curves on crypto tokens like ezETH, not institutional fixed maturity credit. The protocols that worked at scale wrapped existing TradFi structures (Centrifuge tranches, Sky RWA vaults) rather than inventing new primitives. The ones that tried to invent a new primitive collapsed under defaults or stayed small.

Part 4: What Figure Proves

Figure originates home equity lines of credit (HELOCs, a revolving credit line secured by the equity in a home), tokenizes the loan records on Provenance Blockchain, and uses the chain as the system of record for ownership, custody, and servicing. They have crossed $25 billion in originations and are the largest non bank HELOC originator in the United States. Their securitizations carry AAA ratings from S&P and Moody's and have been led by Goldman, JPMorgan, Barclays, and Jefferies. FIGRE 2025-HE3 is the first blockchain ABS rated by S&P across all six tranches.

The reason Figure worked is specific. HELOC has a deep traditional takeout behind it. Agency MBS, private label HELOC ABS, and insurance buyers will absorb seasoned loans in size. Figure tokenized the warehouse layer because the takeout market for the seasoned product was already deep. The on chain layer cycles short term DeFi capital in and out at hourly auction. The loans themselves exit to permanent traditional capital in weeks or months. Without that deep takeout, the cycle would never close, and even the warehouse layer would fail.

Source: figure.com newsroom and Investor pages; provenance.io case study; FIGRE 2025-HE3 presale reports.

Source: figure.com newsroom; provenance.io case studies; FIGRE 2025-HE3 securitization documentation (S&P presale, Morningstar DBRS).

Part 5: How This Lens Applies to NAV Lending

Figure worked because two conditions held at once: the cash flow timing matched what on chain capital wants (short, secured, replaceable), and the traditional market behind it had a deep buyer base for the seasoned loans. NAV facilities share the first condition. Whether they share the second is the question.

NAV facilities are loans against the value of private fund holdings. They have the same long term asset and short term funding mismatch as HELOCs. A NAV loan runs 12 to 36 months. The lender funds it through a warehouse line that resets every 30 days. The shape is identical. What differs is the supply chain behind the seasoned loan.

Looking at the NAV loan supply chain by liquidity and risk side by side makes the gap visible.

Liquidity scored on speed of price discovery and depth of buyer base. Risk scored on loss exposure for the holder of that piece of the stack. APY ranges sourced from 17Capital quoted spreads for NAV loans, Cambridge Associates PE net IRR distributions for LP interests, public warehouse facility disclosures, and IACPM/Financial Times reporting on SRT pricing.

SRT for NAV Is Real and Emerging

Bank SRT on private credit is the one layer of the NAV supply chain with active institutional flow. Sumitomo Mitsui Banking Corporation (SMBC), one of the three largest Japanese megabanks, closed the first of its kind in 2025, a roughly $3 billion risk transfer on credit lines to business development companies (BDCs, publicly traded vehicles that hold private credit loans). Mitsubishi UFJ Financial Group (MUFG), Japan's largest bank, is in talks on a $2 billion BDC credit line SRT. JPMorgan is in talks on a $4 billion plus NAV loan SRT, which would be the first SRT specifically on NAV facilities at scale. The driver is consistent: exit drought in private equity, AI fears for software portfolio companies in private credit portfolios, and earnings quarter pressure on banks to show lower private credit exposure.

Sources: Financial Times reporting on SMBC, MUFG, and JPMorgan private credit risk transfers (2025 to 2026); IACPM Global SRT Bank Survey 2016 to 2024; BIS Quarterly Review, March 2026.

Where Figure's Pattern Maps Imperfectly

There is no deep public takeout market for NAV loans. No agency MBS equivalent, no public ABS shelf. The bank doing SRT keeps the senior 87.5% on its balance sheet because there is nowhere else for it to go. A DeFi product that recreated the SRT structure for NAV pools would add buyer capacity to the first loss slice but would not solve the absence of takeout.

NAV remains a bank balance sheet asset class with an active first loss slice on top of it. A standardized public NAV ABS market with multiple tranche buyers would change that, but does not exist today and may not emerge at HELOC scale. That structural gap is what differentiates NAV from HELOC and limits how far the Figure pattern travels.