We talk to a European business about the evolving world of decentralised finance, the impact of blockchain technology on credit, and why wealth managers must pay close attention. 

The rise in non-bank credit offerings continues. A six-year-old private credit marketplace which uses blockchain technology to connect institutional lenders and borrowers sees strong expansion ahead.

Pareto, originally called Idle Finance (established in 2019), started out in 2021 by targeting private users but has switched to a more institutional client base. It is harnessing the worlds of decentralised finance “ DeFi” – and blockchain to change the way that credit and investment is carried out.

The firm, which is registered in the Republic of Marshall Islands, works with institutional borrowers, such as FalconX, a digital asset prime brokerage (managing more than $1.5 trillion in trading volume); Fasanara Digital, an asset manager and a fintech investing firm – the digital asset arm of Fasanara Capital, (a $4 billion London-based hedge fund); and Bastion Trading, a proprietary trading firm that specialises in derivatives trading, market making in spots and options, machine learning and data-driven systematic strategies. One of the main investors in Pareto is RockawayX.

In May, Pareto introduced a new “synthetic dollar” to link institutional investors with decentralised finance (DeFi) opportunities. The new entity is backed by real-world private credit. To mint the USP, users must deposit stablecoins as collateral. This USP rollout reflects how blockchain technology is taking traditional financial markets into the crypto space with stablecoins gaining more traction.

“Pareto facilitates institutional credit lines for vetted borrowers such as trading firms, fintech lenders, and alternative credit managers. These borrowers access uncollateralised loans through Pareto’s platform, which provides a standardised framework for credit evaluation, reporting, and performance monitoring,” Matteo Pandolfi, co-founder and CEO of Pareto, told WealthBriefing in an interview.

“By using blockchain technology, we’re able to bring greater transparency and operational efficiency to the private credit market. Our platform gives institutional lenders a clear view into how each borrower operates, including their track record, loan usage, and repayment behaviour, making it easier to evaluate risk and stay informed throughout the full credit cycle,” he continued. 

“For wealth managers, this creates a new channel to access private credit opportunities that were historically limited to large institutions. Each credit line is transparently structured with defined terms, borrower disclosures, and periodic performance updates, enabling more informed underwriting decisions and better risk oversight across client portfolios,” Pandolfi continued. 

Pareto applies a performance fee on top of the interest paid by borrowers. The exact fee depends on the type of credit facility, the interest rate model, and is set in collaboration with the curators managing each credit line.

Besides Pandolfi, other senior figures at the firm are William Bergamo, chief technology officer and Samuele Cester, chief product officer. Other team members include Niccolo Manni, engineer, Francesco Bianchi, business development lead, and Bart Antoniak, marketing lead.

Large and growing
DeFI’s scale is already extensive. According to Grand New Finance, the DeFI market size was estimated to be at $20.48 billion in 2024 and is slated to reach $231.19 billion by 2030. The North American market has the largest chunk of it, at more than 36 per cent. 

“DeFi” has been defined as financial services built on blockchain technology that operate without intermediaries such as banks or brokers. It allows users to engage in activities like lending, borrowing, trading, and more, all through peer-to-peer transactions on public, permissionless blockchains.

Pareto says it is building out its offerings at a time when traditional bank credit – for example, to small and medium-sized enterprises –  continues to be squeezed by post-global financial crisis capital requirements. Last November, we spoke to Fasanara Capital about this topic and why the financial world needs a radical re-think. 

Pareto is part of the new ecosystem, Pandolfi said.

“We see blockchain-based credit infrastructure as a powerful tool to help fill the financing gap exacerbated by post-GFC capital regulations. Stricter bank capital requirements have made traditional underwriting slower, more conservative, and costlier – limiting access to credit for many borrowers, particularly small and mid-sized businesses,” he said. 

Custom-built
“Loans on Pareto are designed with different structures to suit various lender preferences and grouped in what we call 'credit vaults'. For example, some vaults offer fixed interest rates with monthly repayments, while others may have shorter cycles or more flexible redemption options. Lenders can choose from a range of available credit vaults that align with their risk appetite and needs – without having to negotiate the terms themselves,” Pandolfi said.

There is “exponential” growth in the specialised loans market.

Pareto launched its first on-chain credit line in December 2024 with an initial facility of $1 million. Half a year later, it is managing almost $50 million in active credit lines across multiple institutional borrowers. 

“The model is designed for scale: new credit lines can be launched by institutional borrowers in under 48 hours using standardised agreements, automated servicing, and built-in reporting tools. This enables Pareto to grow quickly and manage dozens, or eventually hundreds, of credit facilities without the overheads typically seen in traditional, private credit markets,” Pandolfi added.