Article Highlights

• Overview of the DeFi market and challenges of over-collateralized lending.
• Introduction of 3Jane as a new uncollateralized lending protocol backed by Paradigm.
• 3Jane's target audience and strategic goals.
• Regulatory and compliance challenges in DeFi uncollateralized lending.
• How 3Jane builds a user credit graph using Jane Score and zkTLS.
• Paradigm's role in supporting 3Jane and regulatory engagement.
• Implications of 3Jane for the future of lending in DeFi and traditional finance.

Introduction

The DeFi market has surpassed $150 billion in size, but the over-collateralization model still restricts its penetration into the broader credit sector. Uncollateralized lending has always been one of the directions actively explored by the DeFi market, but various protocols have failed along the way. Recently, the uncollateralized lending upstart 3Jane announced that it expects to launch its main line in early November. Supported by top crypto VC Paradigm, 3Jane is another bet in the lending arena, triggering widespread market attention.

A Turning Point in the DeFi Collateralized Lending Model?

3Jane positions itself as a "credit-based point-to-pool money market", aiming to provide algorithm-driven, instant, uncollateralized USDC credit lines for groups that cannot meet over-collateralization requirements. 3Jane has a clear customer profile; in addition to ordinary crypto investors, it also explicitly includes liquidity miners, traders, arbitrageurs, enterprises, and AI Agents as service targets. The target audience that 3Jane is aiming at indicates that it has been positioned from the beginning in the high-turnover, high-capital-efficiency institutional-grade credit market.

Credit Risk and Regulatory Solutions

The essence of uncollateralized lending is that the lender must bear the credit risk of the borrower. In traditional finance, these types of businesses typically require borrowers to pass strict KYC (Know Your Customer)/AML (Anti-Money Laundering)/CDD (Customer Due Diligence) and credit assessments, but the permissionless and anonymous nature promoted by DeFi runs counter to KYC/AML requirements. Therefore, if DeFi uncollateralized lending wants to achieve large-scale commercialization, especially when obtaining institutional funds of the $50 million USD level, it must balance the contradiction between the spirit of decentralization and regulatory compliance requirements. In the early stages, lenders on 3Jane can mint USD3 by depositing USDC, or pledge USDC/USD3 into the protocol to mint sUSD3, and earn up to 27% APY. As of now, more than $7 million USD in credit lines on 3Jane are supported by approximately $83.1 million USD in verified assets.

Restrictions and Regulatory Requirements

For borrowers, 3Jane restricts the scope to U.S. residents with total assets exceeding $150,000 USD, with an initial lending limit of approximately $50 million USD. This restriction is mainly because the protocol needs asset verification to determine credit lines, as well as screening qualified borrowers to reduce risk, and requiring borrowers to be U.S. residents also facilitates debt recovery in the future. The protocol's entry mechanism points to the SEC (U.S. Securities and Exchange Commission) requirements for "qualified investors". Although the definition of a qualified investor typically requires a net worth of over $1 million USD, 3Jane's set entry threshold and its requirements regarding user nationality indicate that the protocol attaches great importance to compliance, restricting users to a scope of customers who meet specific KYC and asset thresholds in the initial product design, so as to minimize regulatory risks.

Compliance as a Cornerstone

For 3Jane, the premise of the closed-loop of its business model is no longer just how precise the technical risk control model is, but depends on its ability to meet the strict regulatory requirements of institutional funds. This means that 3Jane needs to prove that it is a protocol with a verifiable compliance layer in order to attract its target group to the DeFi market.

Building a User Credit Graph

3Jane founder Jacob Chudnovsky admitted that previous uncollateralized credit protocols in the crypto market had failed due to a lack of sound credit underwriting mechanisms and legal recourse, and that a lot of trading happened off-chain. In order to solve the difficulties of risk control and compliance for uncollateralized lending, the protocol created a new technical architecture by combining the 3Jane Credit Risk Algorithm (3CA) and the zkTLS protocol. 3CA is used to capture user interaction data between DeFi, CEX (Centralized Exchanges), and traditional banks as part of the credit assessment. 3CA is based on the user's Jane Score and asset type to underwrite their credit line. Among them, Jane Score is a credit score for the user on the 3Jane protocol, consisting of their on-chain and off-chain credit. The on-chain credit score for Jane Score is fed by Cred Score and Blockchain Bureau Score, both of which have established credit assessment frameworks based on user on-chain behavior; while the off-chain assessment integrates VantageScore 3.0 from TransUnion and Equifax (two of the three major U.S. credit bureaus) as data sources. On the other hand, Jane Score also includes a default penalty mechanism, deterring bad actors by restricting access and increasing interest rates. In short, Jane Score will comprehensively assess the user's credit risk from two dimensions, on-chain and off-chain. Assuming that users try to artificially increase their asset value through behaviors such as external borrowing or transfers in order to borrow from the protocol, this type of behavior will be collected and scored by Jane Score itself. For new users, if they have few past lending behaviors on-chain or off-chain, their initial credit score will not be very high, and the credit line issued by the protocol will be controlled within an acceptable range to prevent serious bad debts from occurring due to lending a large amount of assets. In addition, 3Jane attaches great importance to compliance, and the protocol may return the credit data of defaulting users to off-chain credit agencies, thereby restricting user behavior.

zkTLS and Privacy Compliance

3CA's multi-domain data input helps the protocol build a "credit graph" that transcends a single on-chain dimension. Through Jane Score, 3Jane has also shifted the credit risk assessment of lending behavior from reliance on over-collateralization (asset value) to an uncollateralized (user credit) model, which is the basis for supporting the protocol to issue credit to complex entities such as enterprises and AI Agents. 3CA's assessment of user credit relies on obtaining user behavior in Web2 and Web3, but this conflicts with the need to protect user privacy. Therefore, 3Jane introduced the zkTLS (Zero-Knowledge TLS) protocol to overcome this "privacy compliance paradox". zkTLS is like an encrypted bridge built using zero-knowledge proof technology. It allows borrowers to connect financial data in the Web2 world, for example, bank accounts or CEX accounts connected through Plaid, and privately generate proofs to verify users' ability to repay or asset ownership, without revealing sensitive data to 3Jane or any third party. The value proposition of zkTLS is that it provides compliance proof in the form of "zero-knowledge proof". For regulated financial institutions, the core requirements of KYC/AML are through customer identification, identity verification, and due diligence on the authenticity of transactions. zkTLS can complete these due diligence steps while ensuring user privacy, and assume responsibility under regulatory requirements. This technological innovation has greatly enhanced 3Jane's appeal to compliant institutional funds.

Paradigm Bets on "Compliant" DeFi

On June 4, 3Jane received $5.2 million USD in a seed funding round led by top venture capital fund Paradigm. This investment is not just financial support, but also a strong endorsement from Paradigm for building a "scalable and compliant crypto-native credit infrastructure". In fact, Paradigm's investment in 3Jane is betting on a DeFi blueprint that complies with regulatory trends and has institutional-level access capabilities. The success of 3Jane's institutional strategy heavily relies on Paradigm's frequently conducted "regulatory escort" with the SEC. Paradigm's regulatory lobbying activities aim to solve the main compliance obstacles currently facing the crypto market, especially in the process of integrating traditional finance and DeFi. Their lobbying work is also an important strategic guarantee for 3Jane to attract institutional funds at the compliance level. Custody is one of the biggest bottlenecks facing institutional funds entering DeFi. SAB 121 (SEC Staff Accounting Bulletin No. 121) requires financial institutions to include custodied client crypto assets as liabilities on their balance sheets. This requirement forces the custodian to bear unnecessary expenses, deterring banks, trust companies, and other traditional financial institutions, and greatly limiting the number of qualified custodians. Paradigm believes that SAB 121 is essentially killing the growth of the industry, so it asked the SEC to revoke SAB 121. After lobbying by the industry, SAB 121 was revoked by the SEC in January 2025, reducing the custody threshold for the institution. For 3Jane, the revocation of SAB 121 is a "liquidity entrance" paved by Paradigm. Enterprises are one of 3Jane's target customers, and these institutional-level users require the services of qualified custodians. Now that SAB 121 has been revoked, institutions can deposit larger funds into the protocol through a compliant path to meet the $50 million USD credit requirement, ensuring that 3Jane can obtain a stable and compliant source of funding. Paradigm's regulatory lobbying activities have created more reliable institutional entry conditions for 3Jane, making 3Jane's technical compliance advantages more commercially viable. In the context of traditional financial institutions seeking to meet KYC/AML and on-chain efficiency at the same time, 3Jane may provide a feasible and institution-friendly compliant DeFi model.

Conclusion

The strategic synergy between 3Jane and Paradigm also indicates that DeFi is shifting from serving crypto-native users to a broader traditional credit market, especially the trillion-dollar corporate credit and trade credit markets. Once the most difficult issues regarding credit assessment and compliance for uncollateralized lending are effectively resolved by 3CA and zkTLS, DeFi may take over the entire product line of traditional finance and break free from the constraints of over-collateralization. At that time, DeFi will not only maintain the high efficiency of decentralization, but also achieve the accountability system of regulatory requirements. The main online launch in early November will test whether 3Jane can leverage the massive credit liquidity of traditional finance in the compliance wave. However, investors should continue to focus on 3Jane's credit risk. Although the current probability of default is low, expanding the target audience to enterprises and AI Agents may amplify risks if an economic recession occurs. If not managed well, uncollateralized lending may also revert to the mistakes of traditional finance, so investors also need to pay attention to the effectiveness of the protocol's recourse mechanism, such as collection and legal auctions, etc.