How is Asia's $20 trillion credit market reshaping the DeFi landscape?
Author: Cointelegraph
Translation: Shenchao TechFlow
Patrick Hizon, co-founder and CEO of Mu Digital, discusses why Asia's $20 trillion credit market is crucial for decentralized finance (DeFi) and shares insights on the demand for liquidity and composable yield products, as well as key milestones for platform launches.
For a long time, access to investment opportunities has been influenced by intangible boundaries—the gap between those who qualify for exclusive financial products and those who do not. Although blockchain has lowered many barriers in the global financial sector, the reality is that some of the most attractive opportunities remain confined to traditional systems, making it difficult for ordinary investors to reach them.
Mu Digital is one of the projects dedicated to solving this problem. Founded by former investment bankers who witnessed how yield products in Asia were limited to institutions and ultra-high-net-worth individuals, Mu Digital is building the infrastructure to bring the Asian credit market into the on-chain world—offering it in a permissionless, composable form to global DeFi users, with the support of the Cointelegraph Accelerator program.
In this interview, Patrick Hizon, co-founder and CEO of Mu Digital, delves into the issue of limited access to Asian credit opportunities, the company's strategy for packaging real-world assets into DeFi-compatible products, and the role of the Cointelegraph Accelerator in driving adoption.
Source: Mu Digital
Cointelegraph: What inspired Mu Digital's mission? How do you define the problem you are trying to solve?
Patrick Hizon: The inception of Mu Digital stemmed from a fundamental frustration: the best investment opportunities in Asia are invisible to ordinary investors. Both co-founders built their careers in investment banking in the Asia region, where our survival depended on constantly discovering new trading opportunities.
We witnessed firsthand how corporate-backed yield products were always reserved for a select few financial institutions and ultra-high-net-worth individuals. The rules of this "old world" financial system were designed as a barrier to entry.
Our intention in founding Mu Digital was to bring the best risk-adjusted yields in Asia into the on-chain world, allowing anyone with a Web3 wallet to benefit. However, providing attractive solutions for Web3 users requires professionals to handle sourcing, due diligence, and underwriting of transactions. Moreover, to truly unlock the potential of blockchain technology, these investments must be delivered in a permissionless, composable form, accessible to any DeFi user.
CT: How do you view the evolution of on-chain digital assets? Why is now the right time to bring real-world credit on-chain?
PH: The financial system is on the brink of a paradigm shift. Governments, regulators, financial institutions, builders, and users worldwide are recognizing the power of blockchain-based finance. While the pace of adoption may vary globally, the flow of capital onto the chain is inevitable.
A McKinsey study predicts that by 2025, the value of stablecoins will reach $400 billion, and by 2028, it will reach $2 trillion. Where will this capital flow? Beyond trading, payments, and cross-border remittances, this liquidity will require credible yield alternatives.
While many interesting innovations have emerged in DeFi, there is currently insufficient on-chain infrastructure to support this explosive growth of capital. The entire DeFi market is currently valued at $155 billion. We believe that the $20 trillion credit market in the Asia-Pacific region will play a significant role in providing a sustainable and scalable environment for the explosive growth of stablecoins.
CT: Within the $20 trillion Asia-Pacific credit market, which segments are you initially targeting? What can investors expect in terms of duration, collateral, and risk profiles?
PH: Our advantage lies in our ability to comprehensively cover the entire Asia region—this is where we established our footing as investment banking executives. We aim to bring the entire credit risk curve on-chain: from sovereign debt, corporate debt (from investment-grade to high-yield bonds), to private credit transactions (sourced and due-diligenced by investment banks, private equity, and credit funds).
The yields on our assets range from 4% to 20%. The risk-return spectrum for DeFi users is broad, and we hope to provide solutions that cover various risk-return profiles.
A more important consideration is how to package these assets into the forms that DeFi users need. Our solutions must be highly liquid, composable into DeFi infrastructure, and, most importantly, offer yields that compete with other DeFi yield products in the market.
CT: What role do partnerships play in your strategy? In which areas do you hope to collaborate deeply?
PH: We believe that bringing real-world credit on-chain is the foundational layer of DeFi. Our products are designed to serve as the underlying foundation for other DeFi building blocks (the base DeFi Lego) for further construction.
DeFi needs a better foundational layer. Sovereign credit in emerging markets like the Philippines or Indonesia currently offers yields of 7-8%, which is double the current yield on U.S. Treasuries. Moreover, the stability of these yields far exceeds that of crypto-native yield products, which are often affected by the overall volatility of the crypto market.
Our products will be able to integrate into all categories that make DeFi yield operations interesting: yield trading platforms, vaults, money markets, decentralized exchanges, and perpetual exchanges. Mu Digital is built for DeFi, and we welcome interesting projects seeking quality yield sources to collaborate with us.
CT: So far, what role has the Cointelegraph Accelerator played in your strategy and development?
PH: I want to give special thanks to our accelerator project leaders Paul (No-BS Mentor) and Anthony (Mr. Dip). From the beginning, they provided us with tailored advice based on our experiences and our relative strengths and weaknesses.
In Web3, it is easy to carry over "what worked in the last cycle" to build products. But both Paul and Anthony have experienced multiple Web3 cycles and have rich backgrounds in Web2, which sets Cointelegraph Accelerator apart from other accelerator programs.
Entrepreneurship is entrepreneurship, whether in Web2 or Web3; only those who have deeply engaged in both can formulate the best strategies for success in rapidly changing fields.
We look forward to continued collaboration with Cointelegraph Accelerator.
CT: In what ways have the community and platform of the Accelerator supported your progress?
PH: The support provided by Cointelegraph Accelerator goes beyond just marketing and public relations. They act as strategic partners, helping us think through various issues as we grow into an early-stage project.
Initially, they provided us with foundational guidance on product-market fit, token economics, and blockchain security, and as we gained more market attention, it has evolved into regular meetings addressing our evolving challenges, which only grow with the traction we experience!
Cointelegraph's global influence has helped us expand our market reach from Asia to the U.S. and Europe. The accelerator has assisted us in project pitches, events, and business development introductions in the Web3 space.
We received direct feedback on our fundraising presentations, website branding, and copywriting, even including discussions on how to effectively shoot vlog content to promote the founder's image!
CT: Which experiences from your previous careers have had the most significant impact on how you build and lead Mu Digital now?
PH: We were all early explorers of DeFi during the summer of 2021 and have been focused on the concept of tokenization since the early days of ICOs in 2017. While many early experiments were interesting, we found significant flaws in product design and asset stability, especially based on our backgrounds in traditional finance. Yields should not be a speculative or volatile product.
That said, we still enjoy exploring on-chain. We see the potential of decentralized systems to not only open up to the masses but also innovate financial products through composability.
We know there exists a complete risk curve off-chain that has yet to be brought on-chain. At the same time, we are aware that accessing this risk curve is quite challenging—even in investment banking, the ability to source deals varies widely.
We see an opportunity to bring our expertise into the on-chain economy and deliver on-chain yields to Asia.
CT: As you move towards launch, what milestones are most important to you? How do you assess whether you are on the right track?
PH: As we move towards launch, three milestones are crucial for us. First, completing and launching our initial yield trades. These will prove that Mu Digital can source, conduct due diligence, and tokenize credit opportunities in Asia to institutional standards.
Second, building deep liquidity around these products. So far, demand has been the biggest obstacle faced by all protocols attempting to bring off-chain assets on-chain. Without liquidity, access will only make the market more closed. Third, composability: seeing other DeFi protocols integrate our products as "DeFi Legos" will be a true sign of our integration into the ecosystem.
When the following three things happen simultaneously, we will know we are on the right track: ordinary users are earning yields they never had access to before; institutional investors are confident enough in our underwriting to allocate capital on-chain; and DeFi builders view Mu Digital's yields as foundational modules around which they can build. At that point, we are not just launching a product; we are laying the groundwork for a new financial system.
Cointelegraph Accelerator has partnered with Injective to launch a unique project application. The application deadline is October 17, and the project will officially launch on November 3.
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