Private Credit Isn’t Broken. But It Was Built for a Different Market.
By Asheesh Birla, CEO, Evernorth
Private credit has been one of the defining institutional allocations of the last decade. It has stepped in where banks pulled back, offered differentiated returns, and provided steady income aligned with long-term investment horizons. But the structure that made it work is now showing strain.
Cash distributions to investors have fallen to less than half of prior peaks, reflecting slower exit activity across parts of the private markets ecosystem. In some cases, redemption caps, a feature investors agreed to in calmer markets, have become real constraints. Private credit direct lending redemptions hit a record $19.5 billion in the first quarter this year, but only 53% of the requested cash was actually returned to investors. Private markets are projected to exceed $18 trillion in AUM by 2027, and a significant share of that capital is tied up in long-duration assets with limited exit activity.
This is a natural outcome of a structure designed for one macro environment operating in another. But it’s forcing a question: what role should liquidity play in institutional portfolio construction going forward?
The Tradeoff Being Tested
The appeal of private credit has always carried a clear tradeoff: illiquidity in exchange for higher return potential. For much of the past decade, that balance held. Capital flowed in, exits were relatively active, and distributions followed a steady rhythm.
Today, that rhythm is under pressure. Geopolitical shocks don’t wait for market hours. Monetary policy shifts move capital overnight. In a faster-moving environment, the advantages of private credit are becoming a constraint.
When the April 2, 2025 tariff announcement wiped nearly 11% off the S&P 500 in two days, investors with liquid portfolios could reposition immediately. Those with capital locked in private credit structures could not. The gap between how fast markets move and how fast capital can respond became very difficult to ignore.
Part of that tradeoff is also structural. A private credit fund is a single pool of capital. Investors buy in as a whole, receive one valuation, and accept lock-ups that span the life of the vehicle. The fund is priced, but not the individual positions inside it. That design works when markets are steady, but it gives investors few tools to reprice, rebalance, or exit specific exposures when conditions shift.
At the same time, as refinancing becomes more difficult, asset managers are holding positions longer, with limited visibility into pricing, liquidity and true market clearing levels. Because these loans are bespoke and traded off-exchange, valuation remains opaque and costly, with little standardization.
Portfolio construction will need to start weighing flexibility as much as return. As the limitations of today's private credit structure become more visible, digital assets are increasingly being evaluated, not as a speculative bet, but as a complementary layer.
Digital Assets as Infrastructure
Digital assets are increasingly understood as financial infrastructure. Public blockchains operate continuously and settle in real time. Stablecoins now exceed $300 billion in circulating supply, functioning as an always-on settlement layer. Tokenized real-world assets, including treasuries, credit and money market instruments, represent roughly $20 to $25 billion in on-chain value.
This is a meaningful shift. Capital in these markets can be deployed, repositioned and redeployed without the settlement delays of traditional financial rails. Private markets still provide depth and duration. On-chain markets introduce flexibility and immediacy.
In private credit specifically, tokenization could make illiquid positions more transparent and operationally efficient. Imagine loans being broken into smaller, standardized units, priced on their own terms, moved within KYC-gated networks, and offered on exchange-like venues. Think better price visibility, secondary activity, and less reliance on costly valuation processes. It doesn’t eliminate credit risk or cycle pressure, but it begins to address the structural constraints that define the asset class today.
Once individual positions are priced on-chain, they can also serve as collateral elsewhere. Ethena's USDtb, for example, is backed in part by BlackRock's tokenized money market fund (BUIDL). That pattern could extend to tokenized private credit and let the same exposure support additional strategies rather than sit idle in a locked-up vehicle.
Where XRP Fits
If flexibility and continuous access to liquidity are becoming portfolio requirements, the question becomes: what infrastructure is best suited to support them?
XRP has historically been associated with efficient cross-border payments, but its role is expanding as on-chain financial infrastructure develops. XRP is increasingly being used to support real-time movement, pricing and settlement of tokenized assets. As tokenized credit instruments, foreign exchange markets and liquidity pools develop on-chain, this infrastructure allows capital to move, settle and be redeployed continuously.
This follows a familiar pattern. Equity markets shifted to electronic execution in the 1990s, with adoption accelerating in the early 2000s. Foreign exchange evolved into a more continuous, global market, with daily volumes growing from roughly $1 trillion to approximately $9.6 trillion by 2025.
In each case, the shift wasn’t about replacing the underlying asset class, but about making capital more accessible, liquid and easier to deploy. The same dynamic is emerging on-chain.
The Bottom Line
Private credit isn’t broken, but the assumption behind it is. Investors have thought they could trade liquidity for yield in one part of the portfolio and the rest would pick up the slack. That isn’t holding true when market shocks move capital overnight.
Private credit still delivers duration and yield. Tokenized markets can provide flexibility. XRP is one place where infrastructure is taking shape. Institutions will increasingly need both.
Learn more about Evernorth: https://www.evernorth.xyz/blog-post-03-18-2026