Paradigm leads the investment, how will 3Jane unlock the trillion-dollar decentralized finance unsecured lending market?

Author: J.A.E

The DeFi market size has surpassed $150 billion, but the over-collateralized model still limits its penetration into broader lending sectors. Unsecured lending has always been one of the active exploration directions in the DeFi marketplace, but various protocols are currently at a standstill.

Recently, the new unsecured lending project 3Jane announced plans to launch on the mainnet in early November. Supported by leading crypto VC Paradigm, 3Jane is another move in its lending track, attracting widespread market attention.

The DeFi collateralized lending model may be approaching a turning point

3Jane positions itself as a “credit-based peer-to-pool money market,” aiming to provide algorithm-driven, real-time unsecured USDC credit lines for groups unable to meet over-collateralization requirements. 3Jane has a clear customer profile: beyond ordinary crypto investors, it also explicitly includes liquidity miners, traders, arbitrageurs, enterprises, and AI Agents. This target audience indicates that from the outset, 3Jane is focused on high-turnover, high-capital-efficiency institutional-level lending markets.

The essence of unsecured lending is that lenders must bear the credit risk of borrowers. In traditional finance, such business typically requires borrowers to pass strict KYC( customer identity verification)/AML (Anti-Money Laundering)/CDD (Customer Due Diligence) and credit assessments. However, the permissionless and anonymous nature championed by DeFi runs counter to KYC/AML requirements. Therefore, for DeFi unsecured credit to achieve large-scale commercialization—especially when attracting institutional funds of $50 million or more—it must balance the decentralization ethos with regulatory compliance.

In early stages, lenders can mint USD3 by depositing USDC on 3Jane, or stake USDC/USD3 into the protocol to mint sUSD3, earning up to 27% APY. To date, over $7 million in credit lines on 3Jane are supported by approximately $83 million in verified assets.

For borrowers, 3Jane limits eligibility to U.S. residents with a total asset value exceeding $150,000, with an initial borrowing cap of about $50 million. This restriction primarily stems from the protocol’s need for asset verification to determine credit limits and to screen qualified borrowers to reduce risk. Requiring borrowers to be U.S. residents also facilitates future debt collection.

The protocol’s access mechanism directly targets the SEC’s (U.S. Securities and Exchange Commission) regulations on “qualified investors.” While the definition of qualified investors typically requires net assets over $1 million, the thresholds and nationality requirements set by 3Jane demonstrate its emphasis on compliance. From the product design phase, user eligibility is limited to those meeting specific KYC and asset thresholds, maximizing regulatory risk mitigation.

For 3Jane, its business model’s closed-loop depends not only on the precision of its risk control models but also on its ability to meet the strict regulatory requirements of institutional funds. This means 3Jane must demonstrate that it is a protocol with a verifiable compliance layer to attract its target group into the DeFi marketplace.

3Jane builds a user credit graph, creating a “Privacy-Compliant Stack”

3Jane founder Jacob Chudnovsky admits that previous unsecured lending protocols in crypto have failed due to the lack of sound credit underwriting mechanisms and legal recourse, with many transactions occurring off-chain. To address risk control and compliance challenges in unsecured lending, the protocol combines the 3Jane Credit Risk Algorithm (3CA) with zkTLS protocols to create a new technical architecture.

3CA captures user interaction data across DeFi, CEX (centralized exchanges), and traditional banks, using this as part of credit evaluation. 3CA underwrites credit limits based on the user’s Jane Score and asset types. The Jane Score is a credit rating on 3Jane, derived from on-chain and off-chain creditworthiness. The on-chain credit score is fed by Cred Score and Blockchain Bureau Score, both of which establish credit evaluation frameworks based on on-chain behavior; the off-chain score integrates data from TransUnion and Equifax (two of the three major U.S. credit bureaus) via VantageScore 3.0. Additionally, Jane Score includes default penalties, such as access restrictions and higher interest rates, to deter bad actors.

In summary, Jane Score assesses user credit risk from both on-chain and off-chain dimensions. If a user attempts to inflate their asset value through external borrowing or transfers to borrow from the protocol, such behavior will be captured and scored by Jane Score. New users with limited on-chain or off-chain borrowing history will start with a lower credit score, and the protocol will limit their credit lines accordingly to prevent large-scale bad debt.

Furthermore, 3Jane places high importance on compliance; the protocol may, in the future, feed defaulted user credit data back to off-chain credit agencies to influence user behavior.

The cross-domain data input of 3CA helps the protocol construct a “Credit Map” that extends beyond a single on-chain dimension. Through Jane Score, 3Jane shifts the credit risk assessment of lending behavior from reliance on over-collateralization (asset value) to an unsecured (user credit) model, which is fundamental for supporting lending to complex entities like enterprises and AI Agents.

The premise for 3CA’s credit evaluation is access to user behavior data from Web2 and Web3, which conflicts with the need to protect user privacy. 3Jane introduces zkTLS (Zero-Knowledge TLS) to solve this “Privacy-Compliance Paradox.”

zkTLS acts as an encrypted bridge built with zero-knowledge proof technology, allowing borrowers to connect to Web2 financial data—such as bank accounts via Plaid or CEX accounts—and generate proof privately to verify repayment ability or asset ownership without revealing sensitive data to 3Jane or any third party.

The value proposition of zkTLS lies in providing “Zero-Knowledge Proof” compliance verification. For regulated financial institutions, KYC/AML’s core requirements involve customer identification, verification, and due diligence on transaction authenticity. zkTLS can perform these checks while safeguarding user privacy, fulfilling regulatory responsibilities. This technological innovation significantly enhances 3Jane’s appeal to compliance-focused institutional funds.

Paradigm bets on “Compliance” DeFi

On June 4, 3Jane secured a $5.2 million seed round led by top venture capital firm Paradigm. This investment not only provides funding support but also strongly endorses the broader goal of building “scalable, compliant, native crypto credit infrastructure.”

In fact, Paradigm’s investment in 3Jane is a bet on a DeFi blueprint that aligns with regulatory trends and offers institutional-grade access. The success of 3Jane’s institutional strategy heavily depends on its communication with Paradigm and the SEC’s (U.S. Securities and Exchange Commission) “regulatory escort” efforts.

Paradigm’s lobbying activities aim to resolve major compliance barriers faced by the crypto market, especially in integrating traditional finance with DeFi. Their advocacy work is a key strategic element in attracting institutional funds to 3Jane.

Custody remains one of the biggest hurdles for institutional capital entering DeFi. SEC Staff Accounting Bulletin (SAB) 121 requires financial institutions to record custodial crypto assets as liabilities on their balance sheets.

This requirement forces custodians to bear unnecessary costs, discouraging banks and trust companies from participating, thus significantly limiting qualified custodians. Paradigm argues that SAB 121 essentially stifles industry growth and calls for its repeal.

After lobbying efforts, SAB 121 was revoked by the SEC in January 2025, lowering institutional custody barriers. For 3Jane, the revocation of SAB 121 is a liquidity gateway paved by Paradigm. These institutional clients need qualified custodians, and with the removal of SAB 121, large-scale funds can now be deposited into the protocol through compliant channels to meet the $50 million credit demand, ensuring stable and compliant funding sources.

Paradigm’s regulatory advocacy creates more reliable conditions for institutional entry, enhancing 3Jane’s technical compliance advantages with greater commercial potential. In a context where traditional financial institutions seek to meet both KYC/AML and on-chain efficiency, 3Jane may offer a feasible, institution-friendly compliant DeFi model.

The strategic collaboration between 3Jane and Paradigm also signals a shift in DeFi—from serving only crypto-native users to expanding into broader traditional credit markets, especially trillion-dollar enterprise and trade credit. Once the most challenging credit assessment and compliance issues in unsecured lending are effectively addressed by 3CA and zkTLS, DeFi could support a full suite of traditional financial products, breaking free from the constraints of over-collateralization.

At that point, DeFi will not only retain its decentralized efficiency but also achieve regulatory accountability. The early November mainnet launch will test whether 3Jane can leverage the wave of compliance to unlock massive traditional financial credit liquidity.

However, investors should remain vigilant about 3Jane’s credit risk. Although current default probabilities are low, an economic downturn could expand risks as the target group extends to enterprises and AI Agents. Poor management could lead unsecured lending to repeat traditional financial pitfalls, so investors should also monitor the protocol’s recovery mechanisms, such as collection and legal auction processes.