🤝 Security Token Prime Mid-Week Insights: 4/18/2024

Exclusive Intelligence for Security Token Prime Members

April 18, 2024

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. 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.

3. 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 Mid-Week Market Headlines

Security Token Prime Member Spotlight

Non-performing loans (NPLs) face multiple challenges including information asymmetry, few operators, and liquidity issues. 

Join us on Monday 4/22/2024 as BlockInvest (backed by Credit Agricole) and Davis & Morgan walk us through how they're using tokenization to solve for this in Italy!

Security Token Prime is Made Possible Thanks to Our Enterprise Partners

Over the past few years, worlds have begun to converge more and more. What used to be super-regulated security token offering (STO) markets and crypto-centric lending platforms are now intertwining more and more. Mostly overseas and abroad but also in certain instances within the United States there are cases in which prominent investment managers are looking towards the likes of Centrifuge, Maple, and more recently Obligate for unique financing opportunities. And on the other side of the equation, digital asset and on-chain investors are able to see and build unique fixed income offerings into their own portfolio constructions.

One of the areas we have our eyes on lately is on-chain debt financing for investment funds. The Centrifuge news with Coinbase is awesome to see because 1) Coinbase is able to support Centrifuge’s ecosystem through its Prime Web3 Wallet and attestations among user base and 2) Centrifuge is catching fire at the right time. Equity offerings are tough to sell - they still require a strong road show and/or an even stronger existing audience base. At least on the fixed income side, digital asset investors can compare yields directly to the DeFi side and determine offerings of interest more tangibly. As we see asset classes continue to move on-chain, crypto wallets will act more and more like brokerage accounts and portfolio dashboards, eventually accounting for the bulk of an investor’s portfolio makeup (if not already there).

Peter Gaffney, Head of Research, Security Token Advisors

Security Token Advisors Client Highlights:

STA has elected to spotlight a couple of our advisory & consulting clients here.

Blue Water FinTech - STA is working with Blue Water, an SEC-registered investment adviser and FinTech platform dedicated to Mortgage Servicing Rights (MSRs) and loan servicing with 500+ originators onboarded. STA has been evaluating the tokenization ecosystem on behalf of Blue Water, who is seeking to distribute MSR and associated cash flows to investors as compliant tokens. Blue Water is one of the (if not the) leaders in MSR secondary trades by volume which could contribute to a very notable listing on tokenized secondary marketplaces when the time is right.

Arctic Digital Mining - STA is working with Arctic Digital Mining (ADM) to develop a tokenization platform geared towards Alaskan gold miners under the mission of unlocking the value of in-ground gold deposits via digital securities, and thus bringing utility to unmined gold and precious metals. Targeting a range up to 100 million gold ounces, ADM seeks to bridge the gap between in-ground gold valuations and mined & listed gold (i.e. ETFs and gold-backed stablecoins) through the GiG token. Eventually, we may see price convergence as miners, investors, and users along the value-chain elect to tap into this market directly at the source through the miners on Arctic Digital Mining’s platform.

For Consulting Inquiries or Client Details: please email [email protected]

Use code PRIME for 10% off at checkout!

Herwig’s Pick: Circle

Kyle’s Pick: Bitfinex Securities

Find out why and more every Friday live at 1pm EST on LinkedIn or X/ Twitter. Past episodes available on Youtube or your favorite podcast platform! 

Helpful Resources

Was this email helpful? What else would you like to see?

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.