What new strategies are there for BlackRock, Citigroup, and others entering the $16 trillion RWA market?
Author: Arain, ChainCatcher
Editor: Marco, ChainCatcher
An affiliated church organization called "Colorado Prayer House" has tokenized its main church building. The pastor leading the project stated that tokenizing the building allows it to be placed on the blockchain as a digital asset that can be divided into shares, in order to raise funds to purchase the $2.5 million property.
This is one of the recent cases of RWA, just a small part of this vast track.
In the current lukewarm market, "Real-World Assets" (RWA) are rapidly developing. In July this year, CoinGecko pointed out in its Q2 2024 crypto industry report that Meme Coins, artificial intelligence, and real-world assets (RWA) have become the hottest categories, accounting for 77.5% of web traffic.
For the institutional market, RWA is a sexy concept. Several institutions have reported on the prospects of RWA, such as Boston Consulting Group, Messari, and Binance Research, while traditional financial giants like Citigroup, BlackRock, Fidelity, and JPMorgan Chase are also getting involved.
However, RWA is not a new concept; the most well-known use cases are the USDT and USDC that map the dollar onto the blockchain, which were hyped up between 2020 and 2021 but subsequently cooled down—similar to NFTs back in the day, where even with some backing, a timing for an explosion is still needed.
According to data from Dune Analytics, the RWA narrative has been the second largest growth narrative since the beginning of the year, with this sector rising by 117%, second only to Meme.
RWA should not only be an opportunity for institutions but also a crypto narrative worth capturing. According to a BCG report, the global RWA market is expected to reach $16 trillion by 2030. What does this mean? Coingecko data shows that the total market capitalization of the entire cryptocurrency market is about $2.1 trillion.
"As market awareness increases, retail business is the trend, just like previous crowdfunding, but the B-end business volume is larger. At this stage, the total RWA investments of many individual users may not even match a single B-end investment. For individual users, the best way to participate in the RWA track at this stage is to find good RWA project tokens," said A-Wang, the principal of Web3 lawyer, in an interview with ChainCatcher—he laid the groundwork for RWA's mainstream recognition in 2023 by translating Citibank's RWA research report "Money, Tokens, and Games" due to his background in the financial industry.
RWA Asset Classes Become Richer Innovators Explore Retail Market
RWA refers to the tokenization of physical assets, which can be any tangible asset, such as real estate, stocks, bonds, commodities, art, etc. Currently, the largest share of the RWA market is occupied by stablecoins, which account for over 90% of the market share, and stablecoins are also the third largest asset in the crypto market.
The RWA asset classes have become richer in the past year. The RWA data website rwa.xyz shows that since the second half of 2023, RWA asset classes such as corporate bonds, non-U.S. government bonds, and stocks have begun to emerge and have seen significant growth.
Excluding stablecoins, the top three asset classes by market share are:
- Private credit, totaling about $13.5 billion, with active loan value at $8.66 billion and an average annual interest rate of 9.46%;
- U.S. Treasury bonds, with a total value of about $1.9 billion, an average yield to maturity of 4.96%, and a weighted average maturity of 0.116 years, issued at a rate of about $100 million per month;
- Commodities, with a total market value of about $910 million and a monthly transfer volume of $156.6 million;
These three asset classes have experienced explosive growth since September 2022.
Private credit RWA is currently still the second largest category of assets in the RWA market, with about 66% of the issuance coming from Figure Markets and issued through Provenance Blockchain. According to the Provenance Blockchain official website, the total value locked (TVL) managed by this network has reached $13 billion, making it the number one in RWA market TVL.
"This is a property HomeLoan RWA, distinguishing it from general non-standard private credit RWA. Because property HomeLoan itself is a large and standardized market, this RWA will have a large volume, often in the tens of billions, easily overshadowing other data," A-Wang pointed out. In his view, projects excluding the giants are more worthy of attention, such as Centrifuge and Maple, which are non-standard RWA private credit platforms that may have greater potential for future explosions. Securitize CEO Carlos Domingo has explicitly stated that he is very optimistic about the private credit RWA market.
Figure Markets is built on Provenance Blockchain, using the latter's utility Hash token as gas and transaction fees. However, according to Coingecko data, HASH has not had much trading volume to form a candlestick chart.
It is worth noting that both Provenance Blockchain and Figure Markets are related to Figure Technologies, which is currently one of the largest non-bank home equity line of credit (HELOC) lenders in the U.S.
Provenance Blockchain was developed with the participation of Figure Technologies. Figure Markets is a trading platform that includes stocks, fixed income, alternative investments, and crypto assets, also launched by Figure Technologies, which received over $60 million in Series A funding from institutions such as Jump Crypto and Pantera Capital in March this year.
In a podcast in July this year, Provenance Foundation CEO Anthony Moro stated that they are currently trying to shift from institutional networks to more retail business.
One initiative is to launch an approved yield stablecoin. Anthony Moro stated that the first SEC-approved yield stablecoin "YLDS" or "Yields" is expected to be launched, with a planned yield of 5%.
Figure Technologies submitted an S-1 application to the U.S. Securities and Exchange Commission (SEC) last October, which indicated that Figure issues transferable certificates and installment payment certificates, which are a type of fixed income security. What buyers actually purchase is a debt of Figure, which is unsecured and only backed by its assets. When transferred (if applicable) or upon the expiration of the certificate, Figure will pay the face value and interest.
"There are four different types of securities in the 1940 Act. As far as I know, face value certificates have never been used, and it is the only type of security that allows for peer-to-peer trading without using a broker-dealer. Any other situation requires transactions to be completed through a broker-dealer, but under the rules of face value certificates, this is not necessary, and it starts accruing interest the moment it is in your wallet, accumulating daily. Imagine if Starbucks is now a client of Figure's brokerage, you could go to Starbucks and buy a cup of coffee with YLDS. Compared to paying in dollars with PayPal, you don't need to open a checking/savings account or need a credit card, yet you have a dollar account with a 5% yield," Anthony Moro stated in the podcast.
Additionally, Anthony Moro pointed out that to gain more retail scenarios, Hash plans to enter centralized exchanges, DEXs, etc.
It is noteworthy that Figure Markets also launched FTX debt trading in June this year, acquiring locked Solana tokens auctioned through the FTX bankruptcy process, providing liquidity and opportunities for creditors and investors affected by the FTX bankruptcy—especially for individuals involved with smaller amounts.
Giants Rush into U.S. Treasury RWA Track, Concept More Eye-Catching
This year, the narrative around U.S. Treasury RWA has also attracted considerable attention. Since September 2022, the market share of U.S. Treasury bonds has grown about tenfold, making it the growth engine of this round of RWA.
The U.S. Treasury RWA sector is currently also the main battlefield for traditional financial institutions, with nearly half of the products in this market issued by just BlackRock and Franklin Templeton.
The RWA products issued by these two institutions are not limited to U.S. Treasury bonds. BlackRock's RWA product, the BlackRock USD Institutional Digital Liquidity Fund, has underlying assets including U.S. dollars, money market funds (RRP, the Federal Reserve's overnight reverse repurchase tool), and U.S. Treasury bonds. The Franklin OnChain U.S. Government Money Fund promises that 99.5% will be invested in U.S. Treasury bonds, cash assets, and U.S. Treasury repurchase agreements, while the remaining portion may be used to invest in securities deemed low-risk by the manager, or blockchain-based stocks.
Despite holding a large market issuance share, it should be noted that the number of RWA asset holders for these two institutions is not high. In contrast, Ondo USDY, which ranks third in the U.S. Treasury RWA market issuance share, has a larger number of holders, currently exceeding 4,000.
"The number of RWA holders for traditional financial institutions like BlackRock and Franklin Templeton is low because their main clientele is not on-chain individual users; sales are primarily completed among traditional financial institutions, making it a fund tokenization project, so you will see its TVL is quite large," A-Wang explained.
A-Wang introduced that the tokens corresponding to the two projects, $BUIDL and $FOBXX, currently have no practical use, merely serving as a certificate, and have not yet been integrated with DeFi. In contrast, Ondo Finance's U.S. Treasury tokenization product $USDY has practical uses, capable of serving as collateral for DeFi projects or as a medium of exchange for Web3 payments. Therefore, he suggests focusing on the latter, meaning that crypto-native RWA projects are more meaningful for individual users compared to tokenization projects done by traditional financial institutions.
Ondo USDY is a tokenized note backed by short-term U.S. Treasury bonds and bank demand deposits, currently the largest product by TVL on the DeFi protocol Ondo Finance, which was founded in 2021 by former Goldman Sachs employee Nathan Allman.
As of the time of publication, Ondo Finance's official website shows its TVL is approximately $340 million, with a current price of about $1.05 per token and an APY of 5.35%—in comparison, the trading returns of Ondo Finance's governance token OND are more eye-catching, as this token reached an all-time high of $1.46 per token on June 5 this year, representing an increase of nearly 1725% compared to its all-time low of about $0.08 per token recorded on January 18 this year.
A-Wang has profited significantly from Ondo Finance, stating that he has been following Ondo Finance for a long time, "When I saw Ondo Finance on Coinbase, it was already $0.20 per token, and I exited when it exceeded $1 per token. I believe Ondo Finance is one of my more successful investments in the RWA track."
There are also some players participating in the form of buyers and holders who have not appeared on the RWA.xyz list. For example, some classic DeFi protocols like MakerDAO and Compound, according to Dune data, MakerDAO's balance sheet has over $2 billion in RWA assets, of which over $1.2 billion are U.S. Treasury assets—held through the Monetalis Clydesdale Vault, and corresponding DAI minted. However, MakerDAO's governance token MKR has seen a maximum increase of about 134% this year, and has now basically retreated.
Building RWA Issuance Platform
Whether it is Treasury bonds or private credit, both are fixed-income RWAs, while CycleX prefers assets with higher yields and liquidity, and will tokenize them into funds.
"U.S. Treasury RWA has been a hot topic for some time. But that is not what we want to do. We focus on providing high liquidity assets, covering both primary and secondary markets of traditional finance, and offering innovative asset ranges such as art, film, and entertainment IPs, providing liquidity for these assets through the CycleX platform model," said Rain, founding partner of CycleX, in an interview with ChainCatcher.
CycleX positions itself as an RWA innovation platform, having obtained a license in the U.S. and is applying for licenses in the UK, Canada, and other countries. The platform launched its first tokenized fund in June this year. According to its official website, the platform currently has two funds, with a total TVL of $14.07 million. The themes of the two funds are corporate bonds and investment computing power, both achieving an APY of 100%. Tokenizing in the form of funds, in Rain's view, is a key strategy for achieving asset standardization and enhancing liquidity.
"A 100% APY is based on our enhanced yield box's combined yield; besides yield, liquidity is the most critical," said Zero, the product head of CycleX.
The news page of CycleX clearly states that the RWA themed "corporate bonds" consists of corporate bonds and SPAC companies with a market value of about $200 million, with the raised funds mainly used for mergers and acquisitions of target companies and the establishment or purchase of SPAC companies (focusing on investing in fintech companies in the crypto market), paired with CycleX's governance token WFC to provide an expected APY of 100%.
"Currently, we face a high education cost for the C-end market, even when encountering news media or KOLs, we have to explain what RWA is. We previously conducted some blind box-type operational activities to let users taste a bit of RWA sweetness, but found that the attracted users had no constructive effect on the product," Zero pointed out, indicating that the current problem the platform faces is that relying solely on C-end market education and operations for growth has not been effective.
Therefore, seeking quality RWA has become the focus of CycleX's next development step.
Previously, Rain encountered some securities firms and fund companies in Hong Kong that expressed interest in CycleX, and these institutions' RWA products are still queued in CycleX's issuance list, being intentionally controlled and not released. This is due to concerns that releasing them would not solve the liquidity issue.
"A successful RWA issuance platform should be able to solve liquidity issues. The RWA products currently offered in the market are basically sold using a B2C approach. What we want to do is to enable seamless interactive links between on-chain and off-chain institutions and retail users," Zero said, revealing that they will upgrade to a new generation of AI models, achieving optimal market strategies from asset issuance to user trading.
"As mentioned above, we advocate standardization through funds. Achieving liquidity trading through NAV. This process is relatively compliant, and you can think of it as similar to grayscale fund products," Rain explained.
"Our program only has rules constraining pricing. Note that off-chain RWA generally does not experience unlimited rises and falls, while on-chain can," Zero said.
Increased volatility is both a risk and a temptation.
"Most individual users focusing on the RWA market are here to achieve a turnaround, not to seek stable double returns. Achieving a turnaround requires pursuing higher yields, which is not something RWA products themselves can provide," A-Wang stated.

