Compound founder establishes new company "Superstate": Tokenizing US Treasury bonds on Ethereum
From Compound Treasury to Superstate, comrade Robert Leshner remains true to his original intention: to help the wealthy earn more money.Original: Deep Tide
Author: 0xmin
AAVE founder Stani Kulechov now emphasizes his new identity as the founder of the Web3 social protocol Lens Protocol.
Similarly, Compound founder Robert Leshner, also a leading protocol in DeFi lending, seems unwilling to be left behind and has embarked on a new entrepreneurial journey, targeting the current hot narrative—tokenization of real-world assets (RWA).
On June 29, Robert Leshner announced the birth of his new company, Superstate, on Twitter.
"Today, I am excited to announce the establishment of a new company, Superstate, whose mission is to create regulated financial products that connect traditional markets and the blockchain ecosystem.
The main limiting factor of DeFi is that crypto-native assets are the only interoperable assets. But ultimately, trillions of 'off-chain' assets will enter the blockchain, and we plan to facilitate this migration.
On Monday, we submitted the preliminary prospectus for the Superstate short-term government bond fund to the U.S. Securities and Exchange Commission, marking the first step in the long journey of upgrading financial markets."
According to documents submitted to the SEC on June 26, Superstate will use Ethereum as a secondary record-keeping tool and create a short-term government bond fund that invests in "ultra-short-term government securities," including U.S. Treasury bonds and government agency securities. Additionally, the document emphasizes that the fund will not directly or indirectly invest in any assets that rely on blockchain technology, such as cryptocurrencies.
Currently, Superstate has completed a $4 million seed round financing, with investors including ParaFi Capital, 1kx, Cumberland Ventures, and Distributed Global.
In summary, they are committed to purchasing short-term U.S. Treasury bonds and putting them on-chain, using blockchains like Ethereum for secondary record-keeping, tracking ownership shares of the fund, and allowing direct on-chain trading.
If Superstate's product is approved, then cryptocurrency billionaires and blockchain-native funds will be able to achieve high returns on U.S. government bonds without changing their portfolio management methods, as the current risk-free yield on U.S. Treasury bonds is already significantly higher than DeFi yields.
Superstate stated in a media release, "Our vision is to create an SEC-registered investment product that will compete with stablecoins over time, becoming a reserve asset and settlement option for cryptocurrencies."
Starting with the tokenization of U.S. Treasury bonds, once this scenario is realized and widely applied, it will pave the way for tracking real-world assets on the blockchain in the future, although this path is fraught with layers of regulation.
Founder Leshner also stated that every holder of the asset must be whitelisted, and Superstate will not whitelist smart contracts like Uniswap or Compound, meaning such DeFi applications cannot use it.
Will Superstate's on-chain government bond product receive SEC approval?
Currently, the probability seems quite high, as two similar products have already been approved by U.S. regulators.
Franklin Templeton's "FOBXX": This fund was launched in 2021 and became the first registered mutual fund in the U.S. to use blockchain for processing transactions and recording ownership.
WisdomTree's "WTSIX": A short-term government bond digital fund launched in 2022, investing in short-term U.S. Treasury bonds and using blockchain for secondary record-keeping.
WisdomTree President Jarrett previously stated, "We expect all financial assets to eventually migrate to blockchain infrastructure. This is an important step in that direction, as we bring mainstream investments like fixed income, equities, and commodities into the digital world through blockchain-supported funds and tokenized assets."
WTSIX was officially launched on January 18, 2023, with a fee rate of 0.41% and a minimum investment of $25, but its total net value is currently only $993,600.
In contrast, Superstate's advantage lies in the fact that the founders have ample resources from wealthy individuals in the crypto world.
In 2021, Compound Labs launched Compound Treasury, collaborating with Fireblocks and Circle to allow institutional clients like fintech companies to convert dollars into USDC, which would be deployed on Compound at a guaranteed interest rate of 4%. At that time, the 4% rate far exceeded the yield on U.S. Treasury bonds.
In 2022, the venture capital arm of Thailand's Siam Commercial Bank, SCB 10X, announced a deposit into Compound Treasury. However, by the first quarter of 2023, Compound Treasury announced its closure, as DeFi yields were high-risk and low-return at that moment.
So the question arises: if the U.S. significantly lowers interest rates in the future, causing Treasury yields to drop sharply while DeFi yields rise dramatically, what will Superstate's narrative be?
Once, Compound Treasury helped traditional off-chain institutions profit from arbitrage in the crypto world; now, Superstate helps crypto newcomers profit in the fiat world. The paths are different, but the goals are the same.
From Compound Treasury to Superstate, Robert Leshner remains true to his original intention: to help the wealthy make more money.
