🤝 Security Token Prime Insights: 7/22/2024

Exclusive Intelligence for Security Token Prime Members

Summary and Key Takeaways

1. $2.6M Raised in 24 Hours, the Story of Blockstream

One of the most unique tokenizations in history has been a Bitcoin Layer 2 issued investment tied to the hashrate of mining Bitcoin. The Blockstream Mining Note (BMN1) offered investors exposure to Bitcoin mining with the added liquidity of a security token issued on the Liquid Network (the Bitcoin L2). Owning each BMN token granted the holder rights to a share of Bitcoin mining output, equivalent to up to 2,000 TH/s, over a span of 36 months which reached maturity on July 7th, 2024. Resulting in returns of up to 102%, the operations mined 1,212 BTC (​​~7.76 BTC per BMN1) which overall outperformed a buy and hold strategy.

What’s next? This security token was so successful that Blockstream has decided to work with the same partners to issue the new BMN2 token. This version will have a longer duration of 48 months, hosted on STOKR from July 18th-August 12th and will presumably be traded on Bitfinex Securities, SideSwap, and MERJ Exchange with Fidelity Digital Asset Services acting as the custodian for the underlying bitcoin. For those that didn’t redeem their BMN1 for the mined Bitcoin, Blockstream is offering a 3% bonus for rolling over into BMN2. This offering raised $2.6M in the first 24 hours and at the time of writing has now increased to almost $2.9M.

2. Forget Treasuries - Bonds and Tokenized Public Companies Look to Steal the Stage

Last week we saw a prediction for a tokenized treasuries market (really, liquidity products since many of the popular funds are not solely tied to just US treasuries) see a potential of $3 billion in total market size by end of year. You know what else is in the billions and seeing traction in RWAs? Tokenized bonds are also hitting their stride thanks to startup providers like Obligate and Bitfinex Securities or even the litany of financial institutions ranging from JP Morgan’s Onyx to recently the European Central Bank and the dozens in between. 

Backed topped off this month’s Nvidia tokenization news with 5 more added to the lineup - Alphabet, Gamestop, Microsoft, Microstrategy, and Tesla. Meanwhile Dinari kicked off the month with tokenized AstraZeneca, Johnson & Johnson, Procter & Gamble, and TJ Maxx. Meanwhile, Swarm and others are also attacking this market.  We’ve seen from our date that in the past some tokenized stocks on FTX experienced millions in daily trading volume. Could this become possible once again this year?

3. State Street Commits to Tokenization (Again!)

With $4+ trillion AUM, State Street stands to benefit greatly from tokenization and has been vocal about its benefits and potential in the past. Now, following the likes of BlackRock, Citi, HSBC, and recently GoldmanSach’s announcements of live commercial tokenization applications and services this year, State Street is doing the same. Previously they’ve touted that they’re considering tokenizing ETFs and other alternatives, but it seems the asset manager opted to go after the stablecoin/ deposit token market. 

The news points out that they’ll be leveraging a strategic investment they made into Fnality, a leading institutional payment solution used for market settlement. Let’s see which financial institutions will be the first to cozy up to this new tech, we can likely expect more announcements around this before the year is over. 

4. Robinhood CEO Recognizes ‘Advantage’ Tokenization Creates

Robinhood is well known for helping bring retail investors into stock markets en masse. With the brokerage already active in the crypto space, it’s no surprise that RWAs will be next. Proof of recognizing this potential is the CEO himself attesting to the ‘technology advantage’ of tokenization that will lead to the ‘next transition’ for financial services on stage at a conference. As CEO Vlad Tenev puts it, “You don’t have to squint too hard to imagine a world where stocks are on blockchains.” 

Just imagine what will happen when Robinhood and firms like Coinbase support tokenized stocks and RWAs for retail investors. This future will be a reality sooner than you think and it will shape and entirely new future for capital markets. 

5. Particula Partners with Security Token Market Followed by ITSA Acquisition

A leader in ratings and risk assessment in the tokenized RWA space, Particula has been appearing in the headlines more as of recent with their AA rating of bNVDA (more information in STM Data section), their acquisition of the International Token Standardization Association (ITSA), and partnership with Security Token Market. This data source is crucial to the growth and success of the industry as there’s a need for a more transparent investment environment, which is why STM is proud to be partnering with them. We’ll be integrating their ratings for easy access on STM.Co and you can expect more content, featuring our joint analytics and insights into RWAs. The first one was their CEO, Timm Reinsdorf, joining us on The Security Token Show on Friday. Keep an eye out for a webinar where you’ll be able to ask the team anything you’d like to know.

Their ITSA acquisition comes in tandem with Particula’s partnership with the Digital Token Identifier (DTI) Foundation, aiming to “transition crypto-asset identification from the International Token Identification Number (ITIN) to Digital Token Identifiers (DTIs), integrating the International Token Classification (ITC) framework into the DTI Registry.” This enhances market transparency, operational efficiency, and regulatory compliance which STM will work on including as we further our partnership.

TokenizeThis Workshop Tour Around the US Launches September

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.

Notable Market Headlines

Institutional Activity

STM Data

This week the Security Token Market Data Team would like to shine some light on the recently tokenized NVIDIA stock as tokenized stocks continue to come back to the RWA space. To no surprise we see bNVDA, which was issued by Backed, closely follows the activity of the underlying. 

Although the activity on the tokenized version is substantially lower, the correlation seems to be intact with the highest volume day last week being 7/19 at $7,940.19. This is significantly higher than the usual mid to high hundreds of dollars. 

Here’s some information on bNVDA:

Backed NVIDIA (bNVDA) is a tracker certificate issued as an ERC-20 token. bNVDA tracks the price of NVIDIA Corp (the underlying).

bNVDA is designed to give eligible cryptocurrency market participants regulatory-compliant access to the stock price of NVIDIA, whilst maintaining the benefits of blockchain technology.

Issuer: Backed Assets (JE) Limited
ISIN: CH1173294336
Management Fee: 0%
Transaction Fee: 0.2% for Issuance and Redemption
Broker and Custodian: Maerki Baumann & Co. AG, InCore Bank AG

bNVDA has received an AA rating from Particula, read here. Want a quick synopsis on Particula’s rating, what they do and our recent partnership? Watch this past Friday’s episode of The Security Token Show!

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Hello members,

Last edition I said the summer wasn’t slowing down for RWAs and, WOW, did I ask for it by doing that. We’ve seen a record number of announcements and activity over the last week with too many articles to even offer in-depth coverage on. The patterns are also clearly starting to emerge. 1) Crypto is embracing RWAs through treasury allocations and DeFi integrations with the validation being in the rise of native utility token prices for RWAs (just look at $ONDO, $OM). 2) Institutions are officially bought in now with the biggest banks and asset managers going loud about actively issuing new products and financial services that use tokenization and DLT. 3) Liquidity products, bonds, and tokenized public stocks are driving the investor interest, with real estate continuing its organic growth and adoption into sizeable, noticeable territory by the veterans, like what we recently saw with SteelWave. 

What’s still missing? Clarity around custody and certain regulation, which is starting to be countered globally by competing financial hubs. This will lead to eventual standardization and best practices. The lack of liquidity on ATSs is also still the big elephant in the room. Could collateralization be the answer? It certainly might be for adoption within DeFi. Until we see a large increase in quality marketplace listings and market makers enter the space in a serious way, we’re likely still far off from achieving anything remotely attractive for the rest of the capital markets. 

Let’s keep building infrastructure, issuing products, and voicing our opinions until the rest of the world catches up. 

Happy tokenizing,
Herwig
CEO, Security Token Group 
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