🤝 Security Token Prime Insights: 10/14/2024

Exclusive Intelligence for Security Token Prime Members

October 14, 2024

Summary and Key Takeaways

1. Fidelity SEC Registration Reveals Potential Tokenized Fund That Isn’t Using Blockchain… Yet

Last week it became unofficial news thanks to The Information that Fidelity is finally making a move with a tokenized product… sort of. Unsurprisingly, the firm will be entering the money market fund competition or as we like to call them: liquidity products. Interestingly, the filing with the SEC revealed that they would like to use blockchain and may opt to do so in the future but otherwise it’ll work like their traditional counterpart.

This move is what is called getting yourself on the operating system but not going all in. Unlike BlackRock going all in with Ethereum on a public blockchain, this is more of a fast follower position for the event that blockchain does take over. Better than nothing!

2. State Street Reveals Tokenization Initiatives Will Focus on Bonds and a Money Market Fund

BlackRock, Fidelity, Abrdn, Franklin Templeton, CACEIS, WisdomTree, and Janus Henderson all already represent the Financial Institutions competing in the liquidity products space. State Street has long been suspected as our next victim and that’s officially been confirmed. Additionally, the 5th largest asset manager in the world will also focus on bonds. 

Both use cases are nothing new but represent massive categories that already see healthy traction. Whether corporate, municipal, or bank bonds, there has been an extreme measure of trialing and testing this globally already, including a large corporate bond from Siemens (see STM Data section) and a $10M municipal bond from JPM’s Onyx Digital Debt Service. Finally, it seems the industry is reaching a critical mass of institutional players where the competition is going to accelerate market adoption. The proverbial firing gun has gone off at the tokenization race starting line. 

3. Ethena Allocates $46M in Reserve Treasury to 4 RWAs; BUIDL Winning 40%

Winning Herwig’s Company of the Week is Ethena for showing the market how it’s done, similar to Arbitrum and MakerDAO. If there are $150 Billion+ in stablecoins, then there should be a minimum of $150 Billion in tokenized treasuries backing that up, if not more. Ethena has taken $46M in a reserve fund to allocate to 4 products to begin this journey to 100% onchain collateralization.

More products isn’t always better as you risk any one provider failing on you leading to concerns of a depegging. This could indicate why BlackRock’s BUIDL won the lion’s share at 40% of the total allocation. The other three? MakerDAO/ Sky’s USDS at 29%, and Mountain Protocol’s USDM and Superstate’s USTB at 16.5% and 14.5% respectively.

4. Marathon Mining Becomes Latest to Join RWA Industry Through In-House BTC L2 Anduro and Avant Tokenization Platform Powered by Vertalo

Bitcoin mining these days is dominated by a few major players, one of which is the NASDAQ publicly-listed Marathon. In a clever move to further increase the potential value of their underlying Bitcoin holdings and operations, the firm has incubated a Layer 2 for Bitcoin to enable smart contracts that allow for the possibility of tokenization using the Bitcoin ledger. This in-house incubated protocol is called Anduro. 

One of the main use cases for Anduro is the tokenization of RWAs. Instead of just offering grants and incentives to other tokenization platforms to integrate them, they’ve gone ahead and built a full stack tokenization platform themselves, called Avant and using Vertalo on the backend. They didn’t stop there as they also announced a whiskey barrel fund is already using their platform. Now that’s how you launch a fully functioning RWA ecosystem! All reasons why Kyle chose Anduro as his winner on the show last week.

5. The UK and Europe Bridge Secondary Markets in New Archax and Assetera Partnership Announcement

Archax has long been seen as the leading tokenization firm of the UK, specifically because they are the only one’s licensed with an MTF (Multilateral Trading Facility or the ATS equivalent in the UK) from the FCA that allows them to do this. Of course, the government is calling on other firms to apply to its sandbox and do the same. Still, the UK isn’t part of the same European wide oversight meaning it would have to open up entities and good licenses in Europe to properly tap into those markets. 

Or they can partner up with others instead, which is what they’ve chosen to do here with a partnership with Austria-regulated Assetera. Cross populating listings and investor audiences is one of the best ways to grow in the early days of this industry, dealing with the classic chicken-or-the-egg conundrum. Cleverly, Archax has done the same with US broker-dealer Entoro. On top of a partnership with Ownera’s FinP2P order routing service, it’s safe to expect more of these types of partnerships to come from Archax and the industry as a whole.

6. $9M in… $GEMS?! That’s 40% of Limitless’ RWA Issuance Acquired by the South American Lithium Company (SALCO)

This last headline represents real market activity in RWAs outside of just banks playing around. The $20M $GEMS offering was launched with over $600M in collateralized emeralds and other liquid assets, according to the company. The whole offering is powered by Everest’s tokenization infrastructure. 

What’s really interesting here is that they already have a lead investor/ purchaser out of SALCO. The CEO specifically said “The deal opens our ability to transact in illiquid assets bringing SALCO into the new tokenized future.” That should make anyone bullish on commodities tokenization and the proof that tokenization does enable liquidity and better access to capital markets. 

Notable Market Headlines

Institutional Activity

NEW STM REPORT AVAILABLE - PRESENTED BY INX!

Security Token Market is proud to release September 2024’s market report, analyzing secondary market activity and benchmarking against the CoinDesk 20 Index (CD20).

In this month’s market report, we have meticulously tracked 649 security tokens spanning across 35 marketplaces and 10 blockchains.

Sections include:

  • Key Takeaways

  • CoinDesk 20 Index Benchmark

  • Quantitative Highlights

  • Asset Class Breakdown

  • On-Chain Liquidity Products

  • Platform Spotlight: INX

  • New Tokens and Announcements

We’d like to extend a special thank you to our sponsor, INX, for making this possible! INX One is the company’s marketplace. INX Securities, LLC is an SEC-registered ATS and Broker-Dealer and member of FINRA. Through these registrations and licenses INX can facilitate primary capital raises (RegD, RegS, RegA, F1/S1 and others) and those security tokens trading on a secondary market. Learn more about them and how their assets performed in the report!

STM Data

The STM Data Team would like to shift focus to institutional debt which has continued to grow tremendously throughout the year, especially with the European Central Bank (ECB) trials looking at wholesale CBDC settlement. 

Bringing the total of issued tokenized debt to over $16 billion, there were 3 new issuances in September, 1 of which reached maturity in 3 days - perhaps a trial/ proof of concept. SIEMENS100M is a bond issued out of Germany which was interestingly settled using JPMorgan’s JPM Coin. The “cash leg” settled on Onyx while the bond changed hands via the SWIAT blockchain, all in 93 seconds. This was issued on 9/13 and expired on 9/16. For those that are still active we’d like to shine light on SIEMENS300M and SAXONY50M (State of Saxony-Anhalt), both of which were also issued out of Germany.

With so many bonds under ECB trials, it’s no surprise that European Central Bank executive board member Piero Cipollone has now proposed a unified ledger for the continent. The idea is to make the 60% of EU banks more interoperable, not just from a tech perspective but also regulatory compliance as each country has its own caveats. Aside from bringing together segmented liquidity of course the ECB would also like to ensure central bank money remain relevant in this new web3 world.

Follow trading activity on STM.Co and interact with the debt map on STM Charts to see other countries’ performance!

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Events

Recent Recordings

  • (NEW) Navigating PR Between TradFi and Web3 Media with Amsterdam Group (Recording Link)

  • Beyond the Hype: Cracking the Code of Successful Asset Tokenization with BlockInvest and Polygon (Recording Link)

  • Risk Management in Tokenized Assets with Moody's and Particula (Recording Link)

  • Blockchain Meets Construction with Inveniam & LV8R Labs (Recording Link)

  • Non-Performing Loans with BlockInvest and Davis & Morgan (Recording Link)

  • Issuer Spotlight: Tuscany National Token (Recording Link)

  • Platform Spotlight: Block Time Financial (Recording Link)

  • The TradFi/DeFi Hybrid with Maple, Centrifuge and Swarm (Recording Link)

  • Platform Spotlight: REtokens' New Platform with Tyler Vinson and David Kirschbaum (Recording Link)

  • Powers Hour: New SEC “Dealer” Rule Expansion and DeFi Impacts (Recording Link)

TokenizeThis Workshop Tour Around the US

Get your tickets today for a full day masterclass around tokenization from A to Z. There continues to be a massive education gap in the industry and off the success of the original workshop in Miami last May, we’ve decided to go nationwide. We’ll be visiting NYC, Houston, Boston, LA, SF, Atlanta, and Chicago, check out workshop.stm.co for more information. Use code PRIME for 15% off.

Hello readers,

This is a special week for me. Why? Security Token Market turns 6 years old on Friday. We were the first to launch primary markets coverage in 2018 dedicated only to RWAs (they were called security tokens exclusively back then) and there was no secondary market coverage because no licensed markets even existed for them yet. We’ve come a long way since then! Without a doubt we are the only company in the world with this level of data that goes back so far. 

But we also launched the Security Token Show shortly after, an incredible series of deep research reports praised by the industry, published Blockchain Explained selling thousands of copies, and just last year, our first-ever TokenizeThis. We’re not going to stop there either… duh! Look for some special announcements coming out on our anniversary. There’s a whole new STM coming and I already know you are going to absolutely love it! Shoot me an email if you’d like a sneak peek.

Happy tokenizing,
Herwig “Happy” Konings
CEO, Security Token Group 
Follow me on X / LinkedIn

Herwig’s Pick: Ethena

Kyle’s Pick: Anduro

Find out why and more every Friday live at 2pm EST on LinkedIn or X/ Twitter. Past episodes available on Youtube or your favorite podcast platform! 

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