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July 2024: Real World Assets (RWA) & Stablecoin Recap

July 2024: Real World Assets (RWA) & Stablecoin Recap

Just when July looked destined to be a painful month, a flurry of positive developments brought an about-face while RWA & stablecoin innovation kept pace.

August 12, 2024

Crypto Overview: What Happened Last Month?

A volatile start to July initially had market participants expecting summer doldrums to transition into summer pain, only for the market to abruptly shift tones after several industry developments emerged. The most notable headlines that lifted animal spirits were outspoken support for bitcoin and the broader cryptoasset industry on behalf of former President Trump, the SEC concluding its investigation into Paxos, U.S. inflation falling to 3%, BlackRock CEO Larry Fink stating bitcoin as a legitimate financial instrument, and U.S. Senator Lummis announcing a proposal to establish a strategic bitcoin reserve for the U.S. government.

Fig. 1: July 2024 Returns - Top 10 Cryptoassets by Market Capitalization

To the surprise of many, the aforementioned market developments were more than enough to offset fear, uncertainty, and doubt drummed up after the German government offloaded billions $2B of bitcoin, the U.S. House failing to overturn Biden’s veto that would end controversial SEC crypto guidance, and the start of Mt. Gox creditors being paid out a decade after the former crypto exchange collapsed. When all was said and done, the broader crypto market notched a +1% gain in July after trading down as much as -16% in the first week of the month. Of the top 10 cryptoassets by market cap, XRP (+32%), SOL (+22%), TRX (+7%), and BTC (+6%) were the month’s outperformers.

Although crypto market participants remained largely focused on further institutional adoption of BTC, the long-anticipated launch of ETH ETFs in the United States, and continued memecoin speculation, the Real World Assets (RWA) and Stablecoin sectors continued to see unprecedented adoption and growth. Much like the year's first half, July signaled that both sectors are poised to remain crypto's champions in showcasing blockchain tech's technological advantages. As such, next, we'll take a look at the most notable data points and developments pertaining to RWA and stablecoins to contextualize further just how far both sectors have come and why many market participants expect RWA and stablecoins to continue to remain the darling of the current crypto cycle.

RWA: July 2024 Milestones & Developments

Fig. 2: Real World Assets Total Value Locked (TVL)

RWA total value locked (TVL) ripped to a new all-time high of $7B in early July before entering into a downtrend in the final week of the month and finishing at $6.6B, marking a near -5% drop month-over-month. July’s drop marks the first monthly decline since August 2023, when TVL retreated from $1.33B to $1.29B. Be that as it may, RWA TVL remains up a stagger +160% year-to-date.

Fig. 3: RWA TVL by Category

When looking at RWA TVL by category, it ought to come as no surprise that Government Securities saw one of the biggest increases month-over-month in TVL (+10%), given that the vertical has long been championing the rise of tokenized assets. However, some might not have expected Equities to surge a whopping +54% to more than $3M, which could be the early signs of tokenized stocks gaining widespread adoption. Unfortunately, not all pockets of RWA saw an increase in TVL MoM, as epitomized by the Synthetic Dollar vertical slumped nearly -10% and subsequently shredded almost -$400M in TVL.

Fig. 4: RWA TVL Change by Blockchain

When looking at MoM change in RWA TVL by blockchain, one will find that, unlike the past several months, Ethereum was virtually the only chain to see a considerable notional change in TVL - shedding more than -$260M. Trailing behind was Mantle and Polygon, which saw a relatively less painful drawdown of -$8M and -$11M. On the flipside, the month’s outperformers were Arbitrum (+$1.4M), Solana (+$770K), and Blast (+$5K) - albeit with relatively weak increases compared to prior months.

Fig. 5: RWA-to-DeFi TVL Ratio

Despite hitting an all-time high of 0.044x early in July, our RWA-to-DeFi TVL ratio, which merely compares the TVL of RWA to all of DeFi, slipped from 0.0396x to 0.0366x amid the broader aforementioned decline in RWA TVL. Despite the ratio ending lower in July, it should be noted that of the past seven months, the ratio has only finished lower twice and largely remains in an uptrend in what many would argue is a DeFi vertical continuing to blossom and see meaningful adoption - unlike some of its peers.

Fig. 6: Number of RWA Token Holders

The number of RWA token holders across a select number of RWA-centric tokens, or what we believe to be a proxy for the broader RWA vertical, advanced nearly +1.5% to more than 536,000. Although the monthly change marks the weakest increase since October 2023, the rise witnessed over the past several months suggests that the next wave of RWA adoption is here (as discussed in our 2Q2024 State of the Industry report).

Fig. 7: July 2024 Performance

Despite several RWA metrics signaling a slump in growth for July, the index succeeded in outperforming the DeFi Pulse Index by nearly 100bps. Be that as it may, the index underperformed ETH (-4.6%) and came up considerably short relative to BTC (+5.6%).

Notable RWA Developments:

A report by Standard Chartered estimates that the RWA market to reach $30.1 trillion by 2034, driven by blockchain and DeFi adoption. The report highlights tokenization's benefits, including fractional ownership, operational efficiency, and bridging the $2.5T trade finance gap.
Superstate launched its USCC token on Ethereum. USCC uses a "cash and carry" investment strategy, involving buying spot Bitcoin and Ether while shorting their futures to create a delta-neutral position, allowing profits without market direction bets.
Italy's state-owned development bank, Cassa Depositi e Prestiti SpA (CDP), and largest lender, Intesa Sanpaolo, completed the country's first digital bond issuance under new regulations. The €25M bond was issued on Polygon, with Intesa Sanpaolo as the underwriter and sole investor.
German telecommunications giant Deutsche Telekom's subsidiary announced expanding its Web3 services to the XDC Network, focusing on tokenized real-world assets, trade finance, and decentralized infrastructure.
Slovenia became the first EU nation to issue a sovereign digital bond, a €30 million note settled on-chain via the Bank of France's tokenized cash system. The four-month notes, maturing on November 25, carry a 3.65% coupon and are settled using a wholesale central bank digital currency (CBDC). This initiative is part of the ECB's money settlement experimentation program, and BNP Paribas coordinated the issuance.
Goldman Sachs said it plans to launch three tokenization projects by the end of the year, which will involve issuing RWA, such as money market funds and real estate holdings, onchain.
Moody’s joined Singapore’s Project Guardian, an initiative by the central bank to assess risks associated with asset tokenization, to focus on analyzing tokenized fixed-income products, including stablecoins, and securities to enhance transparency and reduce systemic risks. Launched by the Monetary Authority of Singapore in 2022, Project Guardian aims to improve financial market efficiency and liquidity and involves regulatory bodies from the UK, Japan, France, and the IMF, along with private sector participants like HSBC, UBS, and JP Morgan.
Schroders Capital, a +$5B asset manager, launched a pilot integrating catastrophe insurance data into smart contracts for automatic payments after natural disasters, enhancing efficiency for investors and insurers.
Blocksquare said it is launching a new Marketplace Pool funding round via its Oceanpoint DeFi platform; the initiative aims to democratize hotel investments by making them accessible to a wider range of investors. With the global hotel industry valued at over $700 billion, Blocksquare's fractional investment platform is said to offer a modern alternative to traditional, saturated investment avenues.
Sergey Nazarov, co-creator of Chainlink, predicted that RWA will be the next major trend in blockchain. Nazarov stated that RWAs are poised to hold more onchain value than cryptoassets, estimating that tens of trillions of dollars worth of value can be tokenized, with large institutions like Blackrock and Fidelity already participating in tokenized funds.
Crypto trading firm XBTO created a tokenization team to focus on RWA, targeting mid-tier corporate debt. The firm aims to reduce financing costs and improve investment rates for mid-sized companies. As of the end of the month, XBTO has issued tokenized debt for boutique airline BermudAir and plans to do the same for Delware-based industrial hemp processor AgroRef.
Coinbase Asset Management announced it is launching a tokenized money-market fund. The move aligns with Coinbase's strategy to expand into the tokenization space, supported by regulatory approval from Abu Dhabi to tokenize traditional assets on its Base network.
Hamilton Lane, managing over +$900B, deployed its Senior Credit Opportunities Fund (SCOPE) on the Solana blockchain. This move, in partnership with Libre, allows affluent, crypto-native investors to access SCOPE via Solana.
Robinhood said it plans to enhance efficiency by tokenizing RWA, aligning with their broader integration of blockchain into products and services, as stated by Robinhood Crypto General Manager Johann Kerbrat.
RACE launched its first Layer 2 blockchain on Optimism's Superchain, aiming to revolutionize the tokenization of RWA with enhanced transaction speed, reduced fees, and strong security while supporting a decentralized marketplace for various tokenized assets.
MakerDAO launched the Spark Tokenization Grand Prix, a $1B competition inviting innovators to integrate tokenized RWA into its DeFi ecosystem, with winners receiving up to $1B in liquidity support.
Crypto startup Hamilton launched tokenized U.S. Treasury bonds on Bitcoin layer-2 blockchains Stacks, Core and BoB, marking a first in the industry.

Stablecoins: July 2024 Milestones & Developments

Fig. 8: Stablecoin Total Market Capitalization

The stablecoin total market cap surged to a 26-month high of $165B earlier in the month before concluding July at $164.3B and notching a +1.75% gain. July’s jump also marked the end of two months of virtually zero growth in the stablecoin total market cap, thereby reusing what has been a violent uptrend dating back to August 2023.

Fig. 9: Top Stablecoin Market Capitalizations

When looking at the top stablecoins by market cap, one will find that Tether’s USDT gained a whopping +$1.6B in market cap, double the +$790M increase in Circle’s USDC total market cap, thereby widening the spread with the second largest stablecoin by more than $71B. As of month-end, USDT and USDC comprised 70% and 20% of the total stablecoin market cap, respectively. While most other stablecoins saw little-to-no change MoM, PayPal’s PYUSD stablecoin expanded by nearly +$200M, thereby ranking it as the 7th biggest stablecoin, and Ethena’s USDe stablecoin shed roughly -$390M in market cap. In particular, PYUSD’s abrupt jump can be attributed to a surge in PYUSD minted on the Solana blockchain - going from roughly $80M total PYUSD in circulation to $260M.

Fig. 10: Change in Stablecoin Supply by Chain

When looking at the change in stablecoin supplies on a chain-by-chain basis, one will find that Tron, far and away, saw the biggest monthly change with a net issuance of +$1B. Trailing behind Tron was Arbitrum and Solana, which saw a relatively underwhelming +$338M and +$308M increase. Base, Sui, and Blast were the month’s underperformers with a net redemption of -$62M, -$79M, and -$87M, respectively.

Fig. 11: Total Stablecoin Transactions by Chain

In terms of total stablecoin transactions for July, BSC and Solana were the month’s top performers, with nearly 100M in stablecoin transactions each. However, as shown in Figure 12, the two differ in terms of the size of transactions. For instance, roughly 88% of all stablecoin transactions on BSC were less than $100 vs. 66% for Solana. Additionally, Solana saw considerably more transactions greater than $100K - 413K for Solana vs. 59K for BSC. Trailing somewhat close behind was Tron with 65.5M transactions total - considerably higher than 4th and 5th-ranked Arbitrum and Polygon. It should also be noted that despite Ethereum coming in 7th place, it was far and away the defacto chain for stablecoin transactions exceeding $1M. For context, there were more than ~66,000 stablecoin transactions exceeding $1M on Ethereum, with Tron and Base coming in at second and third with ~35,000 and ~15,000 transactions. Needless to say, while Solana, BSC, and Tron continue to dominate smaller stablecoin transactions more regularly, Ethereum stands as the king in notably larger stablecoin transactions.

Figure 12: Stablecoin Transaction Size By Blockchain, By Amount

Notable Stablecoin Developments:

Tether reported a record $5.2B net profit in the first half of the year, with $1.3B in the second quarter, partly reinvested in strategic projects, as the market cap of USDT surged to new all-time highs.
Swiss regulator FINMA proposed new guidelines for stablecoin issuers to enhance regulatory oversight and mitigate financial risks.
Jingdong Coinlink Technology Hong Kong Limited, a subsidiary of JD Technology Group, said it plans to issue a 1:1 stablecoin linked to the Hong Kong dollar to provide efficient, cost-effective, and secure payment solutions.
Australian stablecoin startup Stables disclosed it is expanding to Europe in partnership with Mastercard, allowing users to make purchases with USDC in 27 European countries.
Standard Chartered Bank, Animoca Brands, and Hong Kong Telecommunications were among the first participants in the HKMA stablecoin sandbox to test operational plans and engage with regulators.
State Street Corp. said it is exploring the launch of its own stablecoin and tokenized deposits to enhance payment settlement via blockchain technology.
Hong Kong Monetary Authority (HKMA) concluded its consultation on creating local stablecoin-related legislation, aiming to manage monetary and financial stability risks with transparent and effective oversight.
The SEC announced that it decided not to pursue enforcement action against stablecoin issuer Paxos over the Binance USD token, following several court rulings against the regulator.
Aave protocol's GHO stablecoin deployed on the Arbitrum network, with plans for a phased rollout to manage security and risk.
Paxos International received regulatory approval from the Monetary Authority of Singapore to offer digital payment token services and launch a stablecoin in partnership with DBS.
Circle became the first global stablecoin issuer to gain regulatory approval under the EU's Markets in Crypto-Assets (MiCA) framework, ensuring compliance for its USDC and EURC stablecoins.
Solana lending platform Solend rebranded to Save and said that it will launch a native stablecoin named sUSD, along with other financial products.
South African fintech startup Neonomad launched Zarcoin, a rand-backed stablecoin, to facilitate seamless local and cross-border transactions.

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Disclaimer: The information contained herein is general information, intended for educational purposes only, and is not intended to constitute legal, tax, accounting, or investment advice. Information, opinions, and views are solely of Fortunafi, and none of the information contained should be used as the basis for any investment decisions. To ensure suitability, contact a licensed investment professional when making any investment decisions and do your own research.A