Crypto Meets Wall Street: The Surging Market of Tokenized Bonds

Surge in Tokenized Public Securities

Tokenized versions of public securities are making headlines, crossing a whopping $200M in market cap this week, as per Dune Analytics. 🪙

With regulatory turbulence stirring up the US crypto space, investors are flocking to tokenized versions of the country’s debt. The market is led by OUSG, a tokenized avatar of Blackrock’s ($BLK) short-term US Treasury Bond ETF ($SHV), which accounts for more than 60% of the market share.

Rising US interest rates and declining DeFi stablecoin yields have piqued interest in tokenized treasuries, hinting at a product-market fit for traditional assets on the blockchain.

Growing Interest and Advantages of Tokenized Securities

Ondo’s founder and CEO, Nathan Allman, reveals that interest is primarily inbound from crypto startups and high-net-worth individuals. 🤑

The allure of Ondo’s products lies in their ease of converting stablecoins into assets that yield accruing treasuries, available 24/7. Matrixdock’s SBTB, another token representing short-term treasury bills, is the second-highest tokenized security with a $72M market cap.

As the business world has begun to appreciate blockchain technology, tokenizing traditional securities has finally seen significant uptake.

Regulatory Hurdles and Future Prospects

However, this success invites regulatory hurdles. Ondo’s assets under management exceeding $150M would necessitate registering with the SEC as a registered investment advisor. 😒

Consequently, Ondo would need to disclose details such as client types, fees, and ownership structure. Interestingly, while fixed-income offerings are gaining traction, equities are lagging. Even Swarm, which launched compliant and tokenized versions of Tesla and Apple stock, has issued a modest $25,000 combined of swAAPL and swTESLA.

Looking ahead, Allman is enthusiastic about a proposal to enable fUSDC, representing yield-bearing $USDC lent to institutions through Flux, as collateral on the leading lending protocol Aave.

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