U.S. Treasuries Lead the Tokenization Boom: Is 10x Market Size the Ceiling?

作者:Jeff Wilser,Consensus Magazine;编译:松雪,金色财经

If the bull market of 2021 is known for its massive endorsement of cartoon apes, meme coins, and celebrities, then the next wave of crypto adoption — or even a “crypto spring” — could come from something less sexy but more substantial: the tokenization of RWA, or real-world assets. ** At least that’s my paper earlier this year, when I reported on the estimated $16 trillion tokenized RWA market.

Since then?

The tokenization space has gone on fire, offering new tools (and profits) for investors and traders. This is especially true for tokenized U.S. Treasuries. According to 21.co, the market capitalization of tokenized assets has increased nearly sixfold since the beginning of January, jumping from $104 million to $675 million. **

One of the reasons** has nothing to do with cryptocurrencies, but with macroeconomic forces. Carlos Gonzalez Campo, a research analyst at 21.co, said: "The rise in Treasury yields has fueled this extraordinary growth. "Three-month Treasury yields have surged from nearly 0% at the end of 2021 to more than 5% at the time of writing on the back of Fed rate hikes. ** Not bad for a “boring” asset. González Campo said: "In an uncertain macro and geopolitical environment, people are fleeing to safety for US Treasuries. ”**

Traditional banks may not have much interest in Dogecoin or NFTs, but they like features like instant settlement (available through RWA), 24/7 trading, lower costs, and the ability to convert illiquid assets into liquidity instruments. As a result, bankers are taking action. For example, Franklin Templeton tokenized more than $300 million of its U.S. government monetary fund into Stellar and Polygon. The European Investment Bank issued a €150 million tokenized bond. BlackRock CEO Larry Fink called tokenization “the next generation of the market.”

**Buyers of these tokens include traders, investors, DAO treasurers, and wealth management firms. ** Nils Behling, COO of Tradeteq, a UK private debt and real asset market, said: "This is especially interesting for those who already use stablecoins, looking for diversification, looking for a yield with minimal risk. ”

In traditional finance, it is common to diversify portfolios through Treasuries and bonds, which provide a kind of “shock absorber” in the event of a stock market crash. Cryptocurrency investors (sometimes) use the same type of risk management, but they use stablecoins instead of U.S. Treasuries. The good thing about stablecoins is that they are (theoretically) risk-free, and the bad thing is that they don’t provide yields. **

“U.S. government bonds are seen as a risk-free rate,” Behring said, and if you can get an interest rate of 5% instead of 0% — and it’s on-chain — then why not? Of course, another problem with stablecoins is that sometimes they’re not completely stable. (Exhibit A: Terra.) As a result, Behring sees tokenized treasuries as “a good hedge against decoupling risks.” **

Given today’s lucrative yields, many in the crypto space now believe that treasuries are essential for modern investments. Allan Pedersen, CEO of Montelis (which works to tokenize RWA for the Maker DAO), even compared tokenized treasuries to carbon, just like carbon in chemical elements. “Life on Earth needs carbon,” Pedersen said, “and life on the chain needs U.S. Treasury bonds.” ”

Trade Finance

Currently, treasuries make up the majority of tokenized RWAs, but more asset classes offer investors more options, some of which have higher risks and rewards. Think of “trade finance”, or the mysterious world of invoicing and accounts receivable. If someone is sending international goods from Copenhagen to Cairo, the invoice is part of trade finance. Companies like Tradeteq are working to tokenize these invoices, which will bring more liquidity to the market, more borrowing options for small businesses, and another asset class for investors. Behring believes that the market size alone is more than $1 trillion and considers trade finance to be “the last frontier of finance.”

Or take a small business loan. “It’s a niche area of underwriting,” says Sid Powell, co-founder of Maple Finance, which also tokenizes RWA. Powell said the yield on small business loans can be well above 10 percent.

“The government has a stimulus package through taxes, and they actually refund the taxes you should have paid,” Powell said. Due to government bureaucracy, these kickbacks will take years to process and will not be eliminated until 2025. Now they can be tokenized and traded as assets, generating benefits for investors. “Once the real-world return on assets exceeds 10 percent, funds, high-net-worth investors and other institutional allocators start to become more interested,” Powell said. ”**

Some of these people with deep pockets may want to invest in both cryptocurrencies (like Bitcoin) and traditional stocks (like Apple stock), and RWA allows them to invest in both stocks in the same ecosystem. Timo Lehes, co-founder of Swarm, said: "For people who invest in and trade cryptocurrencies, there isn’t always a clear difference between the two, then you might want to have all of the above, including stocks and bonds. "Markets, this also brings RWA on-chain. "You don’t want to make all these wire transfers between apps. ”

More aggressive traders are looking for ways to leverage tokenized Treasury bills to make more gains. “I’ve seen people make loans through various agreements and use five or six times leverage,” Pedersen said. You buy tokenized Treasury bonds, then use it as collateral to get loans, then buy more Treasury bonds, and so on. “By stacking on top of each other, you can lock in 10 to 15 percent of your gains,” Pedersen says. (This is the time to say that this is not financial advice, and over-leveraging can be counterproductive.) Or, as DeFi researcher Thor Hartvigsen explains in his widely shared X thread, a 16.3% yield can be earned by “cycling” various RWAs.

The merits of leverage aside, there is every reason to believe that the tokenized pie will continue to grow. Adam Lawrence, CEO of data provider RWA.xyz, suspects that the tokenized Treasury market is entering a “scale phase” and predicts that tokenized Treasuries will “easily reach 10 times the size of the current market” in the coming quarters. **

One last thought. While the term “risk-free” should make everyone in the crypto space take a fresh look at it — we’ve seen that movie before — it’s really how investors look at assets when it comes to U.S. Treasuries. But then again… With the House in turmoil and another government shutdown always looming, it’s fair to ask, “What might be at risk to the U.S. government?”