🤝 Security Token Prime Insights: 4/22/2024

Exclusive Intelligence for Security Token Prime Members

Summary and Key Takeaways

1. PV01 Issues US Treasury Bill Under English Law

PV01 is a firm that launched in January 2023 with the goal of bringing fixed income on-chain in a digitally-native manner. This past week, the organization announced its first $5 million US Treasury Bill sale, originated April 8th and sold a week later to B2C2, BlockTower Capital and Keyrock. The token represents the bond itself with the entire lifecycle of the asset taking place on-chain, rather than wrapping an existing Treasury ETF or Mutual Fund. PV01 notes they are seeing strong demand from market makers, like the aforementioned B2C2 and Keyrock, for on-chain treasuries to support their own liquidity and collateral needs in the ecosystem. This proof-of-concept issuance is set to pave the way for a future corporate bond with a prominent crypto firm in the coming months.

2. Ondo Expands to the Cosmos Ecosystem

Ondo has been dominating the liquidity fund scene since January 2023, amassing $200 million in assets across 2 tokenized products: Ondo Short Term US Government Bond Fund (OUSG) and Ondo US Dollar Yield Coin (USDY). The protocol has footprints in the Ethereum ecosystem (Ethereum and Polygon) and Solana ecosystem, and is now expanding to the Cosmos ecosystem through an integration with Noble. Ondo’s first product on the Noble appchain will be its USDY coin, enabling over 90 blockchains in the Cosmos ecosystem to interact with the fund. That is a massive amount of addressable users who no longer need to bridge to ETH- or SOL-based applications to work with Ondo products.

From the press release, “Cosmos, often described as the "internet of blockchains," is an interoperability network of individual blockchains including dYdX (DYDX), Celestia (TIA), Sei (SEI) and Injective (INJ). Noble is an application-specific chain within the ecosystem designed to issue native digital assets, and Ondo will use the chain as a "routing hub" for liquidity within the Cosmos ecosystem.” Another very notable Cosmos-based blockchain is Provenance Blockchain, who’s already stamped $12+ billion of assets on-chain in the asset-backed securities and mortgage spaces. Eventual intersection between those groups could be very interesting.

3. Woo X and OpenTrade Partner to Issue Retail-accessible Treasuries

Crypto exchange Woo X has partnered with London-based OpenTrade to develop RWA Earn Vaults enabling its retail crypto users to access US Treasury Bill yields directly on the Woo X interface. RWA Earn Vaults will essentially act as an interest-bearing account for its user base to deposit funds into rather than as individual tokenized treasuries or fund products. Still, this is a milestone step for a crypto exchange and venue to begin offering treasury exposure in efforts of providing stickier services to its clientbase - i.e. never forcing them to leave the platform to access simple yields in another brokerage account.

4. Centrifuge Accelerates RWA Lending with Coinbase Infrastructure

Centrifuge, one of the original digital asset lending protocols founded in 2017 and responsible for over half a billion dollars worth of loans, raised $15 million in Series A capital to further build out its institutional capabilities. Centrifuge plans to develop an institutional-only real-world assets (RWA) lending protocol that “will allow verified institutions to onboard RWAs and borrow against their RWA holdings.” The protocol will leverage Base, the Ethereum Layer 2 blockchain incubated by Coinbase, and Coinbase Attestations for on-chain compliance, KYC/AML, and other investor-specific checkboxes. This offers potential for a massive influx of Coinbase Institutional clients and wallets plugged in through Coinbase Prime. As a reference point, there are 266,933 Coinbase Attestations at the time of writing.

5. Regulated Liability Network (RLN) Expands to Europe

This past week showed a number of headlines around bank deposit tokens and stablecoin/CBDC alternatives - a narrative that will probably never dissipate from here on out. Entities in the UK like Barclays Plc, Lloyds Banking Group Plc, Citigroup Inc., Mastercard Inc., and Visa Inc have joined the Regulated Liability Network (RLN) to pilot tokenized deposits and real-time payments across financial services. RLN is a consortium of numerous capital markets players that all contribute to generate a diversified pool of backing that is not susceptible to just one asset or deposit.

This test run is deemed to try three different cases. “One application will reduce fraud for online purchases by making conditional payments that settle on delivery of the goods. Another will trial the payment for house transactions in association with DLT firm Coadjute. The third will involve delivery versus payment for digital bond transactions.” While RLN US uses Canton and SETL as blockchain and technology providers, RLN UK will use R3 and Quant.

Notable Market Headlines

Institutional Activity

STM Data

This week the Security Token Market data team is sharing an excerpt from a recent feature in The Ethereum Investment Framework - The DeFi Report Q1 2024

Source: STM.Co, RWA.xyz

The Private Credit asset class closed the quarter with just under $485 million in outstanding loans on the Ethereum blockchain or its layer 2 solutions. Centrifuge maintained its standing as the dominant force in this product suite with $267 million in outstanding loans, or 55% of the market. Maple was the second-largest protocol by loans outstanding, accounting for 17% of market share with $81 million in size. As onchain loan issuance continues to appeal to a global, niche, or otherwise alternative market, Ethereum-based solutions are already in place to service this market, with 6 of the 7 tracked credit protocols accounting for 92% of loans outstanding all being Ethereum-based.

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