Tokenized Structured Finance
On-chain structured credit — tokenized ABS, CLOs, and private credit tranches.
CTR (USD 10,000+)TRAVEL-RULE (USD 3,000+)ENHANCED-DUE-DILIGENCE (USD 50,000+)
Step 1 · Lender/Investor OnboardingPolicy-EnforcedBlockchain-Native
An institutional investor completing subscription documents for a CLO fund — accreditation, suitability, and risk disclosure reviewed.
Investor completes onboarding for the structured credit pool. For institutional pools (Centrifuge/Aave integration, Maple Blue), this means KYB + accredited investor verification. For permissionless pools (Goldfinch Senior Pool), onboarding may be lighter — UID verification only. L4+L5 lit: identity and authorization are policy-enforced. The compliance surface varies dramatically by pool: institutional pools mirror traditional structured finance onboarding; permissionless pools have minimal gates.
Step 2 · Tranche Selection & TermsCode-EnforcedBlockchain-Native
Structuring a CLO — senior tranche gets first claim on cash flows, junior tranche absorbs losses first, equity tranche earns the spread. The waterfall is the compliance artifact.
The compliance center of gravity. The investor selects a tranche: senior (lower risk, lower yield, first claim on repayment), mezzanine, or junior/equity (higher risk, higher yield, first loss). The smart contract encodes the waterfall — repayment priority, default triggers, liquidation thresholds. L3+L4 lit — tranche structure straddles code (smart contract waterfall) and policy (credit risk disclosures). Sanctions screening fires on the investor address. D9 (prudential) applies because the pool operator has credit risk management obligations.
Step 3 · Capital Deployment (USDC → Pool)Code-EnforcedBlockchain-Native
Wiring subscription funds to a CLO SPV's custody account — capital committed, the investor receives their tranche certificate.
Investor deposits USDC into the pool. The pool smart contract mints a tranche token (e.g., Centrifuge DROP/TIN, Maple pool token) representing the investor's position. L2+L3 lit: consensus and execution process the deposit. The capital is now deployed to borrowers through the pool's credit facility. D10 (operational resilience) applies — smart contract risk is real: a bug in the waterfall logic could mis-allocate repayments. D14 (consumer protection) applies for retail-accessible pools.
Step 4 · Repayment Waterfall & MonitoringCode-EnforcedBlockchain-Native
A CLO trustee distributing monthly cash flows according to the waterfall — senior tranches paid first, then mezzanine, then equity gets the residual (if any).
Borrower repayments flow through the smart contract waterfall. Senior tranche holders receive their yield first, then mezzanine, then junior/equity. If a borrower defaults, the junior tranche absorbs losses first. All of this is code-enforced — the waterfall executes automatically with no trustee discretion. L3 Execution lit: the waterfall is pure smart contract logic. D9 (prudential) applies to the pool operator's credit monitoring. Honesty marker: unlike traditional CLOs, there is no trustee with fiduciary duties, no rating agency, and no independent credit assessment for most DeFi structured products.
Step 5 · Exit / MaturityPolicy-EnforcedBlockchain-Native
A CLO reaching its maturity date — principal returned, final distributions calculated, the fund winds down.
The investment reaches maturity or the investor exits via secondary market sale (if the tranche token is transferable). Principal is returned according to the waterfall. L4+L5 lit: exit is policy-enforced. Tax reporting (D12) applies on realized yield. Honesty marker: many DeFi structured credit pools have experienced defaults (Maple's Orthogonal Trading default, Goldfinch's Stratos/Cauris defaults). The compliance framework — credit committee governance, default recovery, investor communication — is still immature compared to traditional structured finance.
Resolved 5 steps across 1 chain(s). 3 threshold(s) triggered. Frameworks: Bank Secrecy Act, GENIUS Act, OFAC Sanctions Program, FATF Recommendation 16 (Travel Rule), Common Reporting Standard / FATCA.