🤝 Security Token Prime Insights: 6/24/2024

Exclusive Intelligence for Security Token Prime Members

June 24, 2024

Summary and Key Takeaways

1. OpenEden’s TBILL Gets Rated A-bf by Moody’s; RWAs Begin to Bridge to DeFi Through Tokenized Treasuries

Only a handful of tokenized securities have been rated since 4 years ago when Morningstar took the leap and rated a FAT Brands debt offering. And 6 months ago Moody’s rated SC Ventures, a fund on Libre. Now Moody’s is at it again, but this time there’s a big difference. Apart from a generally great A-level rating, OpenEden has ambitions beyond TradFi and into DeFi. This makes OpenEden’s TBILL the first Treasury Product to not only receive such a rating, but the first product with specific intentions of connecting into DeFi. 

This DeFi trend saw some doubling down when we saw Ondo’s USDY product have a staking vault set up by Mantra Blockchain (a new Layer 1 specifically for RWAs) and a collateralization pool also set up on Solana via Drift. Ondo’s USDY seems to be the RWA of choice for DeFi platforms experimenting with bringing RWAs into their ecosystem.

2. Citi to Challenge JP Morgan’s Onyx with CIDAP

JP Morgan’s Onyx has made some considerable achievements with JPM coin, their repo platform, the Tokenized Collateral Network (TCN), and now Digital Debt Services for bond issuance, all on a private-permissioned chain they developed. Banks continue to be sidelined from public blockchains, all of them arguing compliance as the key inhibitor. Despite seeing the GS DAP, HSBC’s tokenization platform, and even Citi’s token services, no bank had invested into this sector the way Onyx did… until now. 

To accept this rival challenge, Citi is stepping up to the plate announcing the Citi Integrated Digital Asset Platform (CIDAP) as the whole organization’s new arm to start leveraging this technology and offering services beyond the cash/ deposit focused services which they’ve already launched in the market. We know blockchain will improve and automate the back office while expanding new capabilities with investor clients with a completely revamped user interface. This means when it comes to banks, their entire business will eventually be forced to transform and upgrade to this new technology. 

3. BrickMark Plans $1+ Billion in Real Estate Tokenization with Dynasty Global and $10 Million Swiss Franc to Do It

The VC market is alive and well for RWA infrastructure companies again. BlockInvest in Italy announced an undisclosed backing from OpenVentures. And BrickMark in Switzerland announced a $10M+ funding round led by a core partner, Dynasty Global. You might have already gathered that BrickMark is focused on tokenization of real estate, which they claim a $1.5 Billion in pipeline for.  However, looks like they will also be launching a payments token with Dynasty while tokenizing $400M of their real estate portfolio. This likely indicates that Dynasty took a significant stake in BrickMark after likely performing a build or buy analysis that ultimately led them to selecting their partner of choice like we’ve seen BlackRock do with Securitize, Abrdn with Archax, Brevan Howard with Libre, and so forth.

Notable Market Headlines

Institutional Activity

STM Data

As Security Token Prime members, this week the Security Token Market Data Team would like to give you early access to the RWA Securities Market Update: May 2024 report (previously STM Market Report). Starting with this month’s edition, we will now be benchmarking the tokenized securities market against the CoinDesk 20 Index (CD20) as whole as well as by asset class.

Here is an excerpt from the report, the Asset-Backed Securities asset class breakdown:

Asset-Backed Securities

  • Market Cap: $8,632,930,140 (6.16% MoM)

  • Volume: $477,311 (92.42% MoM)

CoinDesk 20 Index Benchmark: The basket of asset-backed securities (ABS) tokens performed better than the overall security token market although came short in comparison to the CD20. That said, ABS has the potential to grow in performance as more interesting use cases make their way into the hypothetical basket or as their underlying assets reach interesting milestones. An example may be the Republic Note approaching $1M in their profit pool, marking 50% of the way to reaching a distribution, which may grow demand in the $NOTE token. 

Insights: Asset-backed security (ABS) tokens experienced a modest increase in market cap, while the volume saw a decent uptick. This market cap surge can be attributed to the inclusion of a new Redwood Trust LiquidFi Securitization (SEMT) to the tune of $512.7M on May 14th, marking the 18th securitization Redwood Trust’s RWA Horizon has used LiquidFi for. 

On the volume side, 3 ABS tokens experienced significant spikes in volume. While the HAG Token usually has $0 to $100s in volume on any given day, we saw $14,490 on May 24th boosting its volume for the month to $16,621.92. This comes at the announcement of their round 1 closure on X/ Twitter. Similarly, the Republic Note ($NOTE) tends to have 4-figure days in volume, with May 8th being an exception as it had $26,586 traded for a total of $108,529.84 for the month. 

Meanwhile, $INX had the most monthly volume of the asset-backed securities asset class, closing out May at $352,158.94. With multiple 5-figure days throughout the month, May 15th came close to breaking the 6-figure mark at $93,836. This was the same date that INX updated the public on acquisition plans with Republic. While the announcement reminds everyone of their continued collaboration, the following quote may indicate INX is in a position of power:

Republic acknowledged that INX will not extend the “drop-dead-date” for execution of the definitive agreement in connection with the Acquisition under the Term Sheet, which will lapse on May 15, 2024, in accordance with its terms.

Currently, STM’s tracking consists of 25 ABS products including INX, Republic Note, Blockstream Mining Note (BMN), and 18 Redwood Trust LiquidFi Securitizations to name some examples.

Security Token Prime is Made Possible Thanks to Our Enterprise Partners

Upcoming Events

  • Weekly Industry Updates Breakdown - Tuesday June 25th at 3:30pm EST

  • Office Hours with Security Token Prime - Thursday June 27th at 11am EST

  • Weekly Networking Happy Hour - Thursday June 27th at 4:30pm EST

Recent Recordings

  • 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)

Hello members,

There are many use cases for institutions to use tokenized treasuries and liquidity products ranging from treasury management, onchain settlement, and posting margin. Those are classic use cases of TradFi needing a much needed upgrade. However, none of that is pushing a new frontier the way DeFi will. 

The reason RWAs are an exciting narrative to crypto is because of the potential of using real assets in DeFi contraptions. And the time for DeFi applications to start supporting RWA tokens is now - OpenEden, Mantra, and Ondo all proved that last week. Expect these types of announcements to ramp up from here on out.

Happy tokenizing,
Herwig
CEO, Security Token Group 
@tokenwig

Helpful Resources

We hope you enjoyed this week's Security Token Prime Insights email - if you have any feedback on either what you liked or what you’d like to see, please reply to this email with it.

This newsletter should be not be considered financial advice.
Security Token Prime Insights is for informational purposes only.