🤝 Security Token Prime Insights: 7/29/2024

Exclusive Intelligence for Security Token Prime Members

July 29, 2024

Summary and Key Takeaways

1. Coinbase Asset Management Rumored to Launch Tokenized Money Market Fund

Coinbase has been supporting the RWA industry in numerous ways already from custody support to issuance on the BASE chain to even setting up regulatory sandboxes like Project Diamond. However, this news might trump everything else as the single most exciting tokenization initiative stemming from the global crypto exchange via their institutional arm. It’s no secret that treasuries and money market funds (we like to call them liquidity products) are currently the hottest assets for tokenization for a variety of use cases. BlackRock, Franklin Templeton, WisdomTree, Brevan Howard, Abrdn, Fidelity International and a number of startups like Ondo, SuperState, OpenEden and many, many others are all charging into this category with success.

So it adds up that Coinbase Asset Management would also start here. They’ve been curating an institutional network via crypto asset demand for years and now with the rise of tokenized liquidity products CAM is positioned perfectly to roll RWA products out alongside this. BlackRock managed to turn BUIDL into the largest tokenized fund in history with over $500M in AUM. It’ll be interesting to see what kind of numbers CAM is able to pull off in a similar time frame and also to identify the features and differentiators, presumably one of which will be that it’s built on BASE and another being USDC conversion support. What else will CAM bring to the table?

2. Solana Sees Institutional Adoption for RWAs Through Libre

Brevan-Howard and Nomura backed Libre made waves last week bringing three different RWAs to the Solana blockchain. Hamilton Lane continues its streak of testing out different platforms this time with Libre to launch a private credit fund on Solana with Libre also rolling out a Brevan-Howard Master Fund vehicle and a tokenized fund backed by BlackRock’s ICS Money Market Fund. Instead of just bringing one high-quality issuer to Solana, Libre went and brought three to kickstart the institutional interest in Solana-powered RWAs. They noted already $20M+ in demand but STM will look to track the total success of these products over time.

3. European Central Bank Works With Italian Banks to Trial Bond on Polygon

The ECB continues its streak of proof-of-concepts this time with a number of Italy’s top banks to put a 4-month bond worth €25M using Polygon. Notably, it was the first bond to be issued under Italy’s newest fintech law and also was settled the same day using the Bank of Italy’s TIPS Hash Link" tool that allows interoperability between blockchains and traditional payment rails. Interesting takeaways are the use of Polygon, a Layer 2 ETH public blockchain and that the ECB continues to focus on the promise of settlement and use of digital fiat. This might suggest the ECB will play an active role in providing market infrastructure to all of Europe to fast track their economies to the blockchain. 

4. Tokenized Bond Market to Grow in Emerging Markets from Etherfuse’s $3M Fundraise

Etherfuse’s RWA platform has already issued products, claiming to be the only Mexican peso-denominated yield-bearing asset in the world. The founders specifically chose to work outside of the US because they felt it was not the right environment for them to be able to tokenize bonds. Now they’ve got a fresh set of funding (total funding of $5M) and new valuation of $12.5M, which one could infer that the founders parted ways with roughly 25%. They anticipate this funding will help them expand to over 3,500 products from their current supply of assets across debt from Mexico, Brazil, Spain, Germany, and even a US treasuries backed product. 

The firm says to have already amassed $2 Million in AUM for these tokens from over 10,000 investors. Etherfuse clearly has a large retail investor base already for what they call “stablebonds”. This is a perfect example of tokenization bridging global investor bases and investment opportunities. It may seem all the action is happening with institutions around US-based assets but Etherfuse and many other startups are here to remind us there are RWA ecosystems forming all around the world. 

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 liquidity products, specifically BlackRock’s BUIDL and Franklin Templeton’s BENJI tokens. On April 30th we saw BUIDL officially become the largest tokenized fund, with ~$25.6M in net inflows placing it at over $375M AUM compared to BENJI's $368M after experiencing ~$7.9M in net outflows that day. 

The trend continued until late June/ early July where we saw sharp inflows into BENJI, setting it back on a growing trajectory. Will it catch up to BUIDL? Or will Coinbase Asset Management surpass them both? Let us know your thoughts and keep an eye on STM.Co!

Security Token Prime is Made Possible Thanks to Our Enterprise Partners

Upcoming Events

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

  • Office Hours with Security Token Prime - Thursday August 1st at 11am EST

  • Weekly Networking Happy Hour - Thursday August 1st 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,

As the race to tokenize liquidity products heats up, it’ll be interesting to start charting out why certain firms might be seeing more success than others. There are so many new factors that come into play compared to selecting between traditional money market funds. Beyond things like management fees and who is the issuer, now investors must consider things like is it on public or private chain? What jurisdiction is it in? Which chain and what application support comes from that ecosystem? Which marketplaces or distribution channels does it live on? Is it multi-chain to allow for cross-ecosystem pollination? Which providers are supporting the tokenization or is it a custom-built solution? My favorite (which in my opinion no one has handled in a proper way except for maybe Ondo): What are the actual reserves and are any proof-of-reserve mechanisms built in to show transparency? 

Rating agencies will need to pick up new methods to analyze this new breed of liquidity funds. Investors will look to use new tools (like STM.co!) in order to better understand the key signals and metrics to determine the health and value of the inventory of products available. What’s clear today is you’ll start to see options from the crypto native firms, the institutions, and RWA startups which will create a competitive market leading to a healthy and fair infrastructure of on-chain liquidity products. These are the building blocks necessary to create tokenized capital markets and it's exciting to see so much momentum and attention be invested in it, surely there is no going back - tokenization is here to stay. 

Happy tokenizing,
Herwig
CEO, Security Token Group 
Follow me on X

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.