Pareto’s institutional-grade Credit Vaults have taken a major step forward in composability and capital efficiency. For the first time, capital deposited into Pareto’s Credit Vaults can be used as collateral within DeFi - starting with FalconX’s Credit Vault tokens (“CV tokens”), which represent deposits in the FalconX Credit Vault.
This milestone transforms tokenized private credit from a static, yield-bearing instrument into a dynamic asset that enables on-chain repurchase-style financing – mirroring traditional repo markets while unlocking new capabilities in a programmable financial system.
In traditional finance, repurchase agreements (repos) allow institutions to access short-term liquidity by pledging high-quality collateral – often treasuries or other credit instruments – while maintaining exposure to the underlying asset. Pareto, in collaboration with Gauntlet and Morpho, now introduces this same principle to DeFi.
By using CV tokens as collateral on Morpho, institutions can borrow $USDC against their credit allocations – effectively creating an onchain repo market for private credit. This represents a significant leap in utility, capital efficiency, and interoperability.
FalconX is a leading digital asset prime brokerage with $1.5T+ trading volume, operating at the intersection of traditional finance and digital asset innovation. Focused on solving the fragmentation and complexity of crypto markets, FalconX delivers institutional-grade access to liquidity, execution, and credit infrastructure.
The FalconX Credit Vault on Pareto currently secures $40m in active TVL as of mid-2025, underscoring institutional confidence in the firm’s credit quality, infrastructure, and market leadership.
With M11 Credit acting as curator, the Vault combines robust underwriting and operational resilience, making FalconX Vault one of the most credible forms of collateral in DeFi today.
For professional lenders, asset managers, and treasury operators, the implications are substantial:
Expanded utility: CV tokens can now serve a dual function - delivering yield and unlocking liquidity
Improved capital efficiency: Liquidity providers can retain credit exposure on Pareto while borrowing against their positions, enabling strategies like cashflow optimization or recursive deposit loops
Composability across DeFi: The integration marks a new phase where on-chain private credit becomes a building block across DeFi protocols, not just a siloed yield product
For those exploring advanced strategies, the integration enables looping - a method where users re-deposit borrowed $USDC to increase exposure to the same Credit Vault. This approach is especially relevant for active liquidity managers seeking optimized leverage under a defined risk framework.
To support this, Gauntlet - acting as a risk curator within Morpho - ensures that parameters such as loan-to-value (LTV) and liquidation thresholds are calibrated for institutional-grade risk tolerance.
Moreover, Gauntlet and Aera Finance have launched a fully automated looping vault, which streamlines strategy execution without manual effort. More details below.
Institutions can begin using FalconX CV tokens as collateral and explore looping strategies by following these steps:
1/ Supply the Collateral
Deposit the CV token (AA_FalconXUSDC) into the Aera Vault, curated by Gauntlet.
2/ Collateralization via Morpho
The Aera vault uses the CV token as collateral on Morpho, and borrows $USDC against it.
3/ Strategic Looping
The borrowed $USDC is automatically used to purchase more CV tokens (AA_FalconXUSDC), creating a looped position that amplifies yield exposure.
4/ Continuous Optimization
Gauntlet’s quantitative engine dynamically manages leverage, adjusting exposure based on real-time yield, borrow rates, and market risk. No manual rebalancing required.
To acquire CV tokens (AA_FalconXUSDC), head to the FalconX Credit Vault on Pareto, connect your wallet, complete zero-knowledge KYC verification, and - after approval* - deposit a minimum of 250,000 $USDC into the Vault.
This is just the beginning. As Pareto continues to expand integrations across DeFi, institutional liquidity providers will gain access to more tools, more composable credit products, and more ways to unlock value from their on-chain credit positions.
The recognition of Pareto CV tokens as collateral marks a broader shift in DeFi - from static yield products to dynamic, multi-purpose financial instruments, aligned with the needs of modern institutional allocators.
Not financial advice. Always conduct your own research.
* Participation in the FalconX Credit Vault is subject to FalconX review and approval.
Pareto is a private credit marketplace that connects institutional lenders and borrowers, providing scalable, yield-generating opportunities and bridging institutional capital on-chain.
Tailored for asset managers, digital asset funds, and other professional investors, Pareto offers seamless access to regulatory-compliant alternative credit products. Its infrastructure emphasizes transparency, automation, and flexibility. Credit Vaults are the core primitive: they eliminate utilization-based inefficiencies, reduce operational overhead, and improve capital efficiency for both lenders and borrowers.
As the financial landscape evolves, Pareto aims to set a new standard for institutional credit with fully automated, data-driven lending solutions.
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