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CBDCs Get Trump’d While ONDO Unlocks Tokens! 🔐
RWA World Newsletter - Jan 19, 2024
Ray Buckton
January 19, 2024
Another Friday? In this economy? Thankfully, yes!
And folks tokenizing real-world assets must be working overtime – there’s so much to cover! Let’s rock. 🤘
🎯🔥 Rapid Fire Takeaways:
Acquisitions, IPOs, and CBDC drama - oh my! 🦁🐯🐻
Hypertokenization Rising
🛍️💅 Get In, We’re Going Shopping
That’s a quote from the movie Mean Girls and CoinShares. The exchange-traded product (ETP) manager with over $4.5 billion in AUM has announced that it is exercising its option to purchase Valkyrie Funds.
The recent approval of Valkyrie’s Bitcoin ETF undoubtedly positioned the entity as prime real estate. With big expectations of institutional investors seeking exposure to new emerging asset classes, the acquisition further bolsters CoinShares' intellectual property. CoinShares already handles 40% of all crypto ETPs in Europe, and this acquisition is a big step into the U.S. market. 🦅🤝🦁
Across the pond, securities financing firm EquiLend announced a majority acquisition by WCAS, a U.S.-based private equity giant. WCAS has set aside $200 million for EquiLend to drive further market innovation. Big players in traditional finance keep buying big technology to drive further digitization in market infrastructure. 🏛️
And tokenizing real-world assets is becoming easier with each passing week!
Libre’s fund tokenization infrastructure has officially gone live on Polygon, with Brevan Howard and Hamilton Lane as initial asset management partners. Libre is the first solution using blockchain technology for full-suite digital and physical asset tokenization instead of a platform that only issues digital tokens.
That’s a significant difference. Moodys recently outlined the risks and considerations of tokenized funds, highlighting the nuances involved. A turnkey platform supported by recognized industry players that handle legal, technical, and regulatory frameworks can help push tokenization further into the mainstream. 🚀
🔐 Token Unlocks: Doom or Boom?
Ondo Finance, famous for offering tokenized fractional ownership of U.S. Treasuries, recently announced its points program and plan to unlock its native ONDO token. While interesting, RWA projects like Florence Finance already use points programs to reward user engagement.
The token unlock is what drew the fanfare. ONDO tokens are the primary tool for voting in the Ondo DAO, an entity with significant control over the governance of both Ondo and Flux Finance, one of the market's most prominent decentralized lending protocols. A chart outlining the token distribution was shared via the Flux forum:
Source: Flux Finance
As tokenization ecosystems mature, decentralized governance becomes an increasingly salient issue. Entities like Ondo are blazing trails into a new asset class, making previously intangible assets accessible for everyday investors. We’ll undoubtedly see a greater focus on the risks and benefits of these transitory periods as tokenization continues to evolve. 🌱
If you want to mitigate those risks, Nayms, a blockchain-based risk transfer and capitalization marketplace, is officially live on Base. Their first product, an Industry Loss Warranty Contract (ILW), focuses on reinsuring weather-related catastrophic events in Florida, and they offer a 15% sweetener for early investors in the form of NAYM tokens. 🍬
⚪ Drama is a Circle
The Ledger Insights team always lives up to its name – this time, they have some interesting notes on Circle’s recent annual report. The stablecoin issuing giant took a bold approach of omitting 2023 transaction data from the report, conveniently avoiding any mention of the nearly 25% decline in annual volume on the backs of muted decentralized finance activity. It also failed to cite its peg loss, in which the price briefly slipped below $1, following Silicon Valley Bank’s collapse and unwinding their illiquid assets. 🔍
But… we now know the reason. Circle quietly filed for IPO earlier this year after a failed SPAC. They’re moving into a new phase. The goal is global, from Havana to Hong Kong. Recall that Boston Consulting Group projects $16 trillion in total value to be tokenized over the coming decades. 💹
EURC has a market cap of under $100 million, and Circle recently partnered with Japan’s SBI, hinting that a YENC may be taking up real estate on exchanges soon. Corporate battle lines of tomorrow are being drawn today. 💥
Regulatory trends suggest that Circle is right to see a significant global opportunity for regulated stablecoin financial assets. New EU banking regulations poised to take effect in 2024 label self-hosted digital asset wallets as high risk, suggesting users opt for a regulated custodian. Specifically, using mixers and anonymizing cryptocurrencies were a driving factor in the framework, highlighting a growing online anonymity versus compliance trend. ⚖️
💱 Central Banks Currency Progress
Always action on the CBDC front – this time, former President Donald Trump has decried central bank digital currencies as a tool for government tyranny. Sorry, tangible assets only, America. The Federal Reserve previously issued a paper outlining its interest in different aspects of wholesale CBDCs, suggesting a desire to retain nuance in how the technology is integrated with U.S. financial assets and infrastructure. 🦅
Meanwhile, an EU paper explored potential CBDC bank runs with an interesting thesis. Central banks face their own trilemma, similar to the popular public blockchain trilemma, when it comes to policy. They can only achieve two of these at a time:
Socially Efficient Allocation (meaning appropriate interest rates)
Financial Stability (meaning no bank runs)
Stable Prices (meaning… well, not what we have now)
The paper concludes that decentralized digital tokens make balancing these three even more difficult. This realization may be coming at a good time for Egypt, which is now targeting 2030 for CBDC rollout, citing financial inclusion as a primary aim.
Some jurisdictions are grappling with how traditional assets and institutions will grapple with fractional ownership, enhanced liquidity, and the future of finance. Others, like Jamaica, have to subsidize an upgrade for 20% of all point-of-sale machines in the country before a blockchain network will even work in local financial markets.
Different regions, different challenges.
But at the end of the day, we’re all human.
…
And your opinion matters.
Are CBDCs an affront to freedom or the latest technology for global financial inclusion?
Spill your digital ink and let the world know your thoughts on X or LinkedIn, and make sure to check out the RWA World 2024 Annual Report – hypertokenization is on the way, so get prepared!