Unlocking Onchain Credit: Grove’s $1B Deployment into Tokenized CLOs

A Milestone for Grove and for DeFi

The Sky ecosystem was founded on a vision of radically transparent, decentralized capital formation. With USDS adoption broadening and the ecosystem’s balance sheet steadily expanding, Grove now marks a pivotal step forward: moving from tokenized cash-equivalents into scalable, yield-generating credit.

Grove’s initial deployment into the Janus Henderson Anemoy JAAA Fund, a fully tokenized portfolio of AAA-rated CLOs, is not just a diversification play. It represents a milestone for DeFi itself, a meaningful, onchain allocation into one of the most resilient and popular institutional-grade credit products in the market.

Why CLOs Belong Onchain

Collateralized Loan Obligations have quietly become one of the most important engines of credit formation in traditional finance. Backed by portfolios of senior secured corporate loans (typically 200 to 300 names per deal), CLOs are structured with robust protections and have weathered multiple market cycles with extraordinary resilience.

For capital allocators in the crypto economy, the appeal is clear:

• Floating-rate structure protects against interest rate risk.
• CLOs historically offer a yield pickup of 100–150 basis points over treasuries.
• Scale and liquidity rival many sovereign bond markets.
• Credit enhancement and subordination provide meaningful protection for senior tranches.
• Structural protections like overcollateralization tests divert cashflows to further protect senior bonds.

At the top of the CLO capital stack are the AAA tranches, protected by 35–40% subordination and subject to strict overcollateralization and interest coverage tests. These protections have worked: no AAA or AA CLO tranche has ever defaulted, including through the Global Financial Crisis and COVID. In fact, there have been no principal impairments in CLO tranches rated BBB or higher issued since 2012 (CLO ratings got even more conservative after the 2008 crisis).

Despite this track record, CLOs are often misunderstood, especially in crypto circles. They are not the same as the CDOs that fueled the 2008 crisis. CLOs do not securitize subprime mortgages, but rather are actively managed portfolios of secured loans to established U.S. businesses. They’re governed by strict reinvestment rules and performance covenants, with built-in safeguards that trigger deleveraging if asset quality deteriorates.

The market speaks for itself:

• $1+ trillion in US CLOs outstanding; ~$1.4 trillion globally.
• 2024 set a new record for U.S. CLO issuance, with $190+ billion in new deals.
• Bid-ask spreads in secondary markets remain tight, reflecting strong liquidity and dealer support.

For DeFi protocols and crypto-native organizations seeking to put idle capital to work in scalable, high-quality yield without incurring directional crypto risk, AAA CLOs offer a uniquely compelling profile.

JAAA as a Breakthrough Product

Grove’s first major deployment is a $1 billion allocation into the Janus Henderson Anemoy JAAA Fund, a fully tokenized vehicle that holds only AAA-rated CLO tranches.

JAAA was built by Janus Henderson, a global asset manager with $450+ billion under management, Anemoy, a credit structuring specialist; and Centrifuge, the DeFi-native RWA platform that pioneered tokenized invoice and credit finance.

In 2020, Janus Henderson launched the JAAA ETF on traditional exchanges, the first actively managed fund focused solely on AAA-rated CLO tranches. At the time, many in the market doubted that a CLO ETF could succeed: CLOs traded over-the-counter, were seen as structurally complex, and were thought to be too opaque or illiquid for the daily liquidity demands of an ETF. But Janus Henderson proved otherwise. By focusing exclusively on the most senior tranches and actively managing the portfolio with institutional rigor, the JAAA ETF grew to over $20 billion in assets by early 2025, becoming one of the biggest stories in fixed income.

This is not a synthetic or wrapped asset. It is real exposure to the top of the CLO capital stack, represented by onchain tokens that inherit the economic rights of fully compliant, real-world securities.

For Grove, this is the perfect starting point: a high-quality, liquid, low-volatility asset that demonstrates the viability of large-scale DeFi-to-TradFi capital flows. It sets a precedent not just for what DeFi protocols can own, but how they can own it, and how they can do so with regulatory and institutional clarity.

Grove’s Role in Scaling Real-World Credit

Grove was designed to be Sky’s institutional-grade credit engine: an autonomous vehicle for deploying capital into real-world yield opportunities while preserving the transparency and efficiency of onchain infrastructure.

Until now, most DeFi lending has been either overcollateralized crypto-to-crypto loans or passive exposure to tokenized T-Bills. While both serve important purposes, they are capital-inefficient and offer limited upside. Tokenized treasuries provide a secure foundation, but aren’t sufficient to consistently support long term onchain savings or DAO operations at scale.

That’s where Grove comes in. It extends the Sky ecosystem’s real-world asset strategy into a broader credit universe, targeting assets with higher yield, deeper credit markets, and more flexible risk-reward tradeoffs. Grove operates with its own first-loss capital and governance architecture, minimizing coordination overhead while preserving alignment with Sky’s core parameters.

The vision is simple but powerful:

• Scalable credit creation across onchain and offchain markets.
• Streamlined governance and internal capital buffers that enable independent allocation decisions.
• Programmatic yield routing to support Sky’s balance sheet and USDS holders.

Grove doesn’t just move capital, it moves it intelligently, with real underwriting standards, institutional partnerships, and autonomy to adapt to market conditions.

The Next Chapter in DeFi

Crypto has long promised a more open, efficient, and fair financial system. But without access to real-world, risk-adjusted yield, that system remains incomplete. High-quality tokenized credit solves for one of DeFi’s central challenges: the ability to generate sustainable, stable returns for onchain savers and treasuries without relying on speculation or unsustainable emissions.

By importing low-volatility, uncorrelated credit assets like AAA CLOs, Grove creates a stronger foundation for DeFi:

• DAOs, stablecoins, and synthetic dollar products gain access to resilient income streams.
• Savings products can offer more consistent yields, even during crypto bear markets.
• Onchain capital can compete with traditional financial returns, while retaining programmability and composability.

This isn’t about financial engineering for its own sake. It’s about building a new architecture where crypto-exogenous credit can help power an onchain economy, efficiently, transparently, and at scale.

As Grove scales, we expect new classes of credit to follow: syndicated loans, trade finance, asset-based lending, and more. Each integration brings more opportunity for users, more sustainability for protocols, and more legitimacy for DeFi as an alternative financial system. This is how DeFi grows up, not by mimicking TradFi, but by integrating its strongest features into a better, more open system.

To explore integration opportunities or learn more about Grove’s credit infrastructure, visit grove.finance.

We are actively hiring across several key areas, including engineering, credit, risk, and protocol operations. To learn more or express interest, check out grove.finance/careers.