Empire Newsletter: Crypto natives dig themselves in to the RWA space

Plus, Biden vetoed the SAB 121 overturn


Artwork by Crystal Le


Real-world attitude

Wall Street may have taken the lead in the bitcoin ETF arms race, but crypto natives are still holding their ground in the real-world asset space.

There’s now almost $1.5 billion tied up in tokenized funds buying US Treasurys and other public securities, a figure which has tripled over the past year and nearly doubled year-to-date.

BlackRock’s and Franklin Templeton’s funds, BUIDL and FOBXX, are the two biggest with $456 million and $348 million a pop from 13 and 419 token holders, according to RWA.xyz.

WisdomTree Prime’s government money market digital fund has otherwise attracted $5.5 million from 130 contributors.

(A $5-million minimum investment for BUIDL likely has something to do with the discrepancy. FOBXX has no minimum deposit.)

A baker’s dozen of crypto-native startups are however matching the three TradFi funds for growth, and still make up half of the tokenized fund space.

New York-headquartered Ondo, which has a short-term US government bond fund and a US dollar yield vehicle, has just hit a record $310 million market cap across the two entities, up from $126 million at the start of the year.

Tokenized funds managed by Hashnote, operating out of Miami Beach, and Superstate, based in San Francisco, have seen market cap growth of over 220% together since February. 

Traditional finance’s onchain funds are highlighted in brighter colors

The funds broadly operate similarly to stablecoins like USDT and USDC — but without the stablecoin part. In Tether’s case, it sells tokenized dollars for fiat and buys an equal amount of cash equivalents, mostly short-dated US Treasurys.

What results is that each USDT is backed by an equivalent value which can be easily liquidated to process any redemptions. Tether gets to keep the yield from the Treasurys, earning them billions of dollars in profit every year.

Aside from not issuing stablecoins in return for capital, tokenized money market funds and the like do pretty much the same thing as Tether et al, but they pass the yield down to token holders and charge a management fee instead.

RWA.xyz puts the average yield to maturity for tokenized treasuries, including BlackRock’s and Franklin Templeton’s, at 4.96% right now (about $74 million from $1.5 billion).

In any case, Wall Street clearly has competition when it comes to onchain funds. There are currently about 2,000 holders of these funds overall — and almost half of them are with Ondo, a blockchain startup founded by former Goldman Sachs employees that funded itself in part with a $10-million initial coin offering in 2022. 

— David Canellis

Data Center

  • The private credit segment of the RWA space is over four times larger than tokenized funds, with $7.92 billion in active loans, most of them through Figure.
  • DEX volumes have fallen for the second month in a row: $177 billion in May compared to $197.8 billion in April.
  • Blast is pulling ahead of Base for total value locked, with $2.28 billion to $1.75 billion.
  • Telegram-centric memecoin Notcoin is up 240% in the past week, now a $2.2 billion token and firmly in the top 60.
  • BTC and ETH are up slightly on the day, sitting at $69,100 and $3,810 a piece.

Show me the votes

In classic late Friday news dump fashion, President Joe Biden vetoed a resolution aimed at overturning the Securities and Exchange Commission’s Staff Accounting Bulletin 121. 

Biden criticized the measure in a letter announcing his veto. He says his administration is “eager” to work with politicians on Capitol Hill on a “comprehensive and balanced” regulatory framework for crypto, and that the resolution risked jeopardizing the “well-being” of consumers. 

ICYMI: SAB 121 would require financial institutions to disclose customer crypto holdings on their own balance sheets. 

It’s not a hugely popular rule, with both traditional finance firms and crypto firms worried that it’ll make it harder than it already is for institutions to interact and work with crypto companies.

Here’s the thing: While the resolution passed both houses of Congress with bipartisan support, the veto would require a two-thirds majority in both the House and Senate. The House passed it 228-182, with over 20 Democrats signing on while the Senate voted 60 to 38, again with Dem support. 

The veto isn’t necessarily shocking, given that Biden said he planned to veto the resolution if it came to his desk weeks ago, but there was hope that he wouldn’t go through with it following the bipartisan support for the resolution. A handful of lawmakers signed a letter to him last week acknowledging how the voting record showed both sides of the aisle agreed that the bulletin could harm consumers.

Ahead of the veto, the American Bankers Association asked Biden to reconsider. 

“Precluding regulated banking organizations from effectively providing digital asset safeguarding services at scale harms investors, customers, and ultimately the financial system, with the market limited to custody providers that do not afford their customers the legal and supervisory protections provided by federally-regulated banking organizations,” ABA argued. 

If you’re familiar with ABA, then you know it’s a little surprising to see them come out in favor of the resolution, given that the association also helped Sen. Roger Marshall, R-KS, and Sen. Elizabeth Warren, D-MA, create the Digital Asset Anti-Money Laundering law (which has been criticized as anti-crypto).  

SkyBridge’s Anthony Scaramucci — known for his short stint in former president Donald Trump’s White House — said that Biden’s decision “may cost him more than he realizes” and that the decision came at a “critical time.”

Scaramucci is, of course, referring to Trump’s promised support of the crypto industry ahead of the November election. 

While the campaign has announced no formal policies, the former president has garnered support for his promises as the industry looks for presidential candidates who back — or, at the very least — understand the sector.

Whether politicians on Capitol Hill can overturn the veto remains to be seen, but Scaramucci’s right: While Biden’s admin warned about the veto, it doesn’t change the fact that the negative sentiment has started a big discussion within crypto. This only throws fuel directly on the fire. 

— Katherine Ross

The Works

  • Coinbase announced a $25 million donation to Fairshake, Fox Business reported. 
  • After going quiet earlier this month, Roaring Kitty posted on X, sending memestocks soaring.
  • Matter Labs dropped its applications for a ZK trademark following backlash.
  • Japanese crypto exchange operator DMM Bitcoin said it suffered an ‘unauthorized leak’ of $305 million worth of bitcoin. 
  • Australia’s first spot bitcoin ETF is set to launch on Tuesday, CoinDesk reported.

The Morning Riff

Q: Should DAOs give free helicopter money (stimulus packages) to court developers?

Gaming is turning out to be a white whale for crypto. On paper it makes sense — own in-game assets that have taken days, weeks or months to collect, maybe sell them for profit. Grind for loot that can turn into real-world loot.

But as it stands, practically all crypto-enabled games exist within indie gaming. Last year, a YouGov survey indicated that less than 20% of US gamers played indie titles — which makes the idea of a proper AAA crypto gaming title super appealing. 

A larger prospective audience could mean deeper markets for any digital assets tied to that game. Which is bullish. With that in mind, a $250 million budget could be just the thing crypto needs to land its first big title.

— David Canellis

This is a tough one, honestly. I’m a big believer in aiding innovation, but it depends on what kind of innovation we’re talking about. How much runway room is there for whatever projects are receiving the funds? What kind of problems do they solve? How can this improve the sector? 

While I want to give a flat yes, it’s far too nuanced of a discussion for a single answer in my (humble) opinion. 

In theory, though, it’s a great way to grow an already blossoming industry but context is always key.

— Katherine Ross

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