Regulated tokenized US Treasurys are coming on-chain, just not in the US

Digital asset liquidity provider Enigma Securities has partnered with Circle-backed tech company OpenTrade to bring US Treasury bill-backed yield products on-chain.

This product will be available to Enigma’s institutional clients through their existing OTC (over-the-counter) trading desk set-up.

According to Jeff Handler, the chief commercial officer and co-founder of OpenTrade, the estimated annualized yield for these real-world asset (RWA) backed products will be between 4.5% to 5%.

“This allows Enigma’s clients to unlock this stable, predictable yield on otherwise idle USDC balances without any additional onboarding requirements, and using the exact same methods they use to transact with Enigma today,” Handler said.

According to Handler, transactions for these products will be conducted as fixed-term, fixed-rate (based on the term and rate of the T-bills) secure loans in USDC, to the Open Trade Special Purpose Company facilitated entirely by Enigma.

“The OpenTrade SPV has been established for the sole purpose of processing these secured loans, which will include buying, custodying and selling the underlying assets backing the loans to financial institution counterparties.”

“The structure is entirely bankruptcy remote, and Enigma clients are always fully secured by the assets backing these secured loans,” Handler said.

Handler believes that it is important to have regulated offerings of crypto assets for clients, as it offers customers legal protection.

“Our clients can trust in the fact that the solution is maintained by a regulated financial services firm that is legally required to act in clients’ best interest across all aspects of our services,” he said.

Enigma Securities will not be the first company to offer tokenized US T-bills to its clients. Information compiled by rwa.xyz shows that the total tokenized treasury product market has reached over $858 million, with Franklin Templeton’s Benji product, which uses the Stellar blockchain, being far and away the largest at $331 million.

A growing interest in RWA across LatAm

These latest RWA-backed products will be available to Enigma’s client base across Europe, Latin America and Asia. US investors will not be able to purchase these offerings.

According to Handler, Latin American clients have shown particularly high interest in yield products backed by RWAs.

He believes this is likely a function of the demand for USD-denominated financial assets that can provide stable and predictable returns, noting that local currencies in LatAm countries have historically been subject to high amounts of volatility, limiting their ability to save and accumulate wealth.

“The ability to store value in USD and accumulate value by investing that USD into high-quality assets like US Treasury bills is truly a step change for individuals and businesses in this region,” Handler said.

Additionally, he notes that these investments are extremely limited in the traditional finance sector across LatAm for both businesses and individuals.

“In this environment, the Enigma and OpenTrade solution is able to unlock access to these,” he said.

Updated Jan. 10, 2023 at 4:21 pm ET: A previous version of this article stated that the Enigma OTC company, rather than OpenTrade SPV, was responsible for processing secure loans.

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.