On-Chain Student Loans Could Quadruple DeFi’s Total Value Locked, Says Animoca’s Yat Siu

Key Takeaways

• Animoca Brands Chairman Yat Siu believes on-chain student loans could be the next big DeFi opportunity.
• He recently pointed out that if 10% of student loans were issued on chain, it would quadruple DeFi’s total value locked.
• To that end, the Animoca-incubated Pencil Finance has issued $1 million worth of student loans in its inaugural tranche.

Animoca Brands is betting on student loans being the next big DeFi opportunity, with chairman Yat Siu recntly observing that if just 10% of student loans were issued on chain, it would quadruple the total value locked on decentralized finance platforms.

In an initial step toward that goal, on July 10, the Animoca-incubated Pencil Finance announced the successful deployment of $1 million worth of student loans funded entirely with on-chain capital.

A Trillion Dollar Opportunity

Speaking at the Consensus 2025 event in April, Yat Siu pointed out that the student loan market is worth more than $2 trillion, “in America alone.”

“Imagine if you could bring that type of a sort of loan book on chain,” he stated.

Existing DeFi TVLs are “nothing compared to the kind of loan books that are out there that could be optimized,” with blockchain technology, he added.

There could be many benefits to such a transition, Yat Siu argued. For starters, on-chain finance “reduces the friction and the cost” of borrowing money.

At the same time, by onboarding the next generation of Web3 users, student loans could accelerate crypto adoption and catapult DeFi into the financial mainstream, he added.

Pencil Finance Issues First On-Chain Student Loans

Fresh out of Animoca’s Web3 incubator, Pencil Finance has issued its first tranches of on-chain student loans, with initial financing provided by Animoca Brands, Open Campus, and NewCampus.

Built on the Arbitrum-based EDU Chain, the initial deployment lends USDT to students in Indonesia and the Philippines for a duration of 8 years, offering a fixed return to investors of up to 15% APY.

This creates “a new real-world asset class where eligible users can earn yield generated from educational loan repayments, demonstrating how blockchain can expand access to education while generating transparent returns,” Yat Sui said in comments shared with CCN.

Risk Profiles in Tokenized Credit

Pencil Finance is among a burgeoning crop of lending platforms that grant investors access to private credit markets via crypto tokens.

Some of the most successful of these include Figure, a Home Equity Line of Credit (HELOC) provider that has amassed a $10 billion loan book.

However, Pencil Finance is one of the first platforms to offer unsecured loans, which come with unique counterparty risks.

Of course, riskier investments offer more attractive returns, and Pencil’s 15% annual yield is higher than equivalent products in the traditional financial sector.

However, in a DeFi sector accustomed to high-wire leverage structures that seem to make money out of thin air, it offers a rare chance to generate yields while providing genuine social utility.