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

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

June 06, 2024

Crypto Overview: What Happened Last Month?

A rather uneventful start to May was met with an uptick in positive market-wide developments that signaled better days are ahead for the industry, and the bulls remain in control. While virtually all pockets of crypto ended the month in the green, the resurgence in appetite for risk coincided with the memecoin sector leading the rally and market participants shifting away from an “old school” view that a surge in memecoin demand is indicative of a cycle top. Now, it’s merely a reflection of a fundamental shift in the standard “crypto market cycle.”

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

Last month’s strength can be seen when looking at the May performance of the top 10 cryptoassets by market cap - which collectively posted an average and median return of +14% and +12.3%, respectively. While some cryptoassets and crypto sectors performed better than others, most gains can be attributed to a notable regulatory and economic shift out of the United States. More specifically, following U.S. Presidential Candidate Donald Trump's outspoke support for crypto and a commitment to "embrace" crypto and not allow the U.S. to settle for "second place" in the industry, a once bi-partisan issue suddenly became a partisan issue overnight. That is to say, shortly after Trump showed his acceptance for bitcoin and crypto, the following took place:

The U.S. House passed the FIT21 crypto bill in a 279-136 vote, making the CFTC the leading regulator and watchdog of cryptoassets.
The U.S. SEC approved spot Ethereum ETF exchange applications from Nasdaq, CBOE, and NYSE, with eight additional ETF issuers approved - including BlackRock and Fidelity.
News broke that President Joe Biden's re-election campaign has begun reaching out to crypto industry players for guidance on "crypto community and crypto policy moving forward."

Not only that, but the broader cryptoasset market felt the tailwinds of May’s inflation data, signaling a continuation of its previous downward trend and, thus, the expectation of the U.S. Federal Reserve cutting rates this year. Furthermore, signs of corporate adoption of bitcoin, as evidenced by news that over 600 firms revealed significant investments in spot BTC ETFs in their latest 13F filings and news that publicly traded Semler Scientific’s purchased $40M worth of BTC as part of its treasury strategy, lifted animal spirits.

As bullish of a month as it was for all crypto sectors, many market participants might have missed the unprecedented adoption and developments unique to the Real World Assets (RWA) and stablecoin sectors. As with every monthly addition of the Fortunafi RWA & Stablecoin recap, next, we’ll cover the most significant milestones and notable developments of May 2024.

RWA: May 2024 Milestones & Developments

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

RWA TVL surpassed $6B for the first time in history after advancing +16% from April’s month-end reading of $5.28B. Last month’s leap marks the fourth consecutive month of double-digit percentage gains in TVL, as well as nine-figure increases in TVL. As of May 31, 2024, the TVL of the RWA sector has+ grown by $3.4B, marking a +143% increase year-to-date.

Fig. 3: RWA TVL by Category

Staying true to this year's trend, government securities and synthetic dollars were the biggest gainers in May when looking at the month-over-month (MoM) change in TVL. More specifically, the government securities vertical grew by more than +$192M (+15%), second to synthetic dollars at +$660M (+28%). In third place was commodities, which advanced a relatively measly +$16M (+1.6%). However, Private Equities did see the third largest month-over-month increase in percentage terms at 7%. The sector's ongoing adoption wave remains centered around government securities and synthetic dollars - which could change if/when the U.S. Fed begins cutting interest rates.

Fig. 4: RWA TVL Change by Blockchain

For the second month in a row, Ethereum took rank as May’s leader when looking at MoM RWA TVL change with a remarkable +$844M increase. Optimism and Polygon were second and third to Ethereum, which saw RWA TVL rise by a relatively marginal +$2M and +$1.3M, respectively.

Fig. 5: RWA-to-DeFi TVL Ratio vs. Crypto-TradFi Risk-Free Yield Spread

After hitting an all-time high in April 2024, our RWA-to-DeFi TVL Ratio trended lower in May despite bouncing off an intra-month low of 0.0276x. The decline can be explained by DeFi TVL accelerating faster than RWA TVL in May. The relative outperformance can also be seen when looking at our Crypto-TradFi Yield spread, which is merely the difference between the 10-year U.S. Treasury and the average USDC supply rate on Aave and Compound. The spread widened from 2.1% to 2.64% as borrow demand ramped up, and the 10-year U.S. treasury yield slipped a modest 9 bps. But while DeFi appeared to have taken the cake over in May, as we’ve repeatedly said, one should be open-minded to the likelihood of RWA TVL eventually playing catch-up with DeFi TVL as adoption, innovation, and integration persists.

Fig. 6: Number of RWA Token Holders

The number of RWA token holders of BST, CFG, ENA, FACTR, GFI, MPL, ONDO, RIO, TRADE, TRU, and wCFG (a proxy for the broader RWA sector) grew by more than +13,000 to 518,169, a +2.7% increase for the month. As of month-end, the number of RWA holders has surged by more than +75,000, an +18% increase this year.

Fig. 7: Apr. 2024 Performance

Between an unexpected approval of multiple ETH ETFs and DeFi TVL outpacing RWA TVL, it ought to come as no surprise that our RWA Index, which consists of MKR, ENA, ONDO, CFG, CANTO, and MPL tokens with a max weighting of 25%, underperformed both ETH (+25%) and the DeFi Pulse Index (+20%) at +19%.

Notable RWA Developments:

Fortunafi announced the completion of a strategic funding round, bringing total raised capital to $9.51M, and the forthcoming launch of its new stablecoin protocol, Reservoir. The funding rounds included investors such as Shima Capital and Manifold, with the latest round closing in December and the seed round having closed in October 2021.
Plume raised $10M in seed funding, led by Haun Ventures, to develop the first Layer-2 blockchain specifically for RWA. Other participants include Galaxy Ventures, Superscrypt, A Capital, SV Angel, Portal Ventures, and Reciprocal Ventures.
Securitize completed a $47M funding round led by BlackRock, with additional investments from Hamilton Lane, ParaFi Capital, and Tradeweb Markets. Proceeds will support Securitize's ongoing innovation and expansion in the digital asset securities ecosystem.
Chainlink announced an expanded partnership with Hong Kong-based Arta TechFin to bring RWAs on-chain, addressing market needs for comprehensive asset origination and trading solutions.
NFT Workx launched the latest version of its Asset Workx mobile app, enabling users to easily tokenize real-world possessions and organize them in a centralized hub, integrating Web3 wallets for seamless asset management.
Liv, UAE’s first digital bank launched by Emirates NBD, signed a Memorandum of Understanding (MoU) with Ctrl Alt, a B2B alternative asset solutions provider, to explore tokenizing RWA. The MoU was signed at the Dubai FinTech Summit by Marwan Hadi of Emirates NBD and Matt Ong of Ctrl Alt. Liv will leverage Ctrl Alt's expertise in blockchain design for its RWA offering, with Ctrl Alt known for creating revenue-generating infrastructures for enterprise clients.
Deutsche Bank joined the Monetary Authority of Singapore's (MAS) Project Guardian to explore asset tokenization in regulated financial markets. The multi-year initiative involves global policymakers and financial industry representatives. As part of the asset and wealth management workstream, the bank will test a blockchain platform for tokenized and digital funds, proposing protocol standards and identifying best practices for the industry.
According to Mathew McDermott, Goldman Sachs' Global Head of Digital Assets, the investment bank is expanding its crypto involvement. Speaking at Consensus 2024, McDermott highlighted the benefits of tokenization, noting that digitizing the lifecycle of asset issuance enhances operating efficiency and liquidity by attracting a broader group of investors.
Blocksquare announced the tokenization of $100M of properties, launching its Oceanpoint v0.5 platform. This milestone includes 118 diverse assets across 21 countries, including hotels, restaurants, and healthcare facilities.
The Depository Trust and Clearing Corporation (DTCC) completed a pilot project with blockchain oracle Chainlink and major U.S. financial institutions to accelerate the tokenization of funds. The project, called Smart NAV, aimed to standardize the dissemination of net asset value data across various blockchains using Chainlink's interoperability protocol. Participants included American Century Investments, BNY Mellon, JPMorgan, and other leading financial firms.
The Hong Kong Monetary Authority (HKMA) announced it is partnering with industry representatives to explore asset tokenization, announcing the formation of the "Project Ensemble Architecture Community.” Initially, the focus will be on creating a mechanism for seamless interbank settlement of tokenized deposits through wCBDC for asset transactions.
The House Financial Services Digital Assets Subcommittee disclosed that it will conduct a hearing on June 5 to explore the potential benefits of RWA; Congress will hear testimony from industry experts to assess how RWA tokenization could facilitate more efficient markets.
Jenny Johnson, president and CEO of Franklin Templeton, expressed strong support for blockchain technology during an interview at the Milken Institute Global Conference. She highlighted a successful experiment showing blockchain significantly reduced costs compared to traditional methods and predicted that ETFs and mutual funds will eventually adopt blockchain.

Stablecoins: May 2024 Milestones & Developments

Fig. 8: Stablecoin Total Market Capitalization

After seven months of “up only,” the stablecoin total market cap saw a deceleration of growth in May and posted its worst MoM change since October 2023. The slump can be interpreted as merely a reflection of new capital inflows coming to a standstill, at least for the time being. Be that as it may, with summer right around and global markets tending to experience seasonal molasses, the case could also be made that the trend will resume in the months and/or quarters ahead.

Fig. 9: Top Stablecoin Market Capitalizations

Although the rankings among the largest stablecoins by market capitalization were essentially unchanged in May, there were notable fluctuations for a few stablecoins. Most notably, Tether's USDT market cap grew by +$1.4B, resulting in USDT's dominance hitting 66% and its spread with Circle's USDC widening to $77.5B. The aforementioned widening can also be explained by USDC's market cap falling more than -$810M last month. Second to USDT's surge in market cap was Ethena's USDe, which grew by more than +$700M, surpassed $3B, and took rank as the 4th largest stablecoin.

Fig. 10: Change in Stablecoin Supply by Chain

When looking at the change in stablecoin supply across many of the largest Layer-1 and Layer-2 blockchains, Tron (+$973M), Base (+$588M), Arbitrum (+$486M), and Near (+$122M) experienced nine-digit net-issuances in May - ranking them as the month’s best performers. Of the ten largest chains by total stablecoins issued, the average and median change came in at +$84M and +$63.8M, a notable drop from April’s average and median change of $914M and $408M, respectively.

Fig. 11: Total Stablecoin Transactions by Chain

When examining stablecoin transactions across various Layer-1 and Layer-2 blockchains, Solana (131.1M), BSC (78.2M), and Tron (62.4M) emerged as the top 3 chains for the second month in a row. Per Figure 12, a closer look revealed Solana as the preferred platform for transactions under $1,000 (~90M transactions). Not only that, but Solana also came out on top for transactions greater than $100K (9.3M transactions), with Tron and Ethereum trailing behind with 561K and 399K transactions. Despite coming in second to last place in total transactions, Ethereum dominated in transactions exceeding $1M, posting nearly 76,000 transactions. In contrast, Tron and BSC trailed behind with only 29,293 and 3,999 transactions in said bracket, respectively.

Figure 12: Stablecoin Transaction Size By Blockchain, By Amount

Notable Stablecoin Developments:

Re, a platform specializing in tokenized reinsurance, launched its first open-ended reinsurance fund on the Avalanche network. Initial investors include Nexus Mutual, with a $15M allocation, and the Vista fund of Ava Labs, contributing a smaller deposit.
Crypto exchange Bybit integrated Ethena’s USDe "synthetic dollar" for various trading activities. Bybit now allows USDe to be used as collateral for perpetual futures trading with leverage and has listed spot trading pairs for BTC and ETH against the token.
Circle, the issuer of the USDC stablecoin, said it plans to move its legal headquarters to the U.S. ahead of a planned initial public offering. The company recently filed court paperwork for the relocation, although the spokesperson declined to provide further details. Currently domiciled in Ireland, Circle filed to list shares publicly with the U.S. SEC in January 2024.
Rep. Patrick McHenry (R-N.C.) assured that U.S. crypto regulations will be enacted within the next year, citing strong bipartisan support for the Financial Innovation and Technology for the 21st Century Act (FIT21). Speaking at CoinDesk's Consensus 2024, McHenry emphasized that both crypto policy and law are inevitable. He expressed confidence that the momentum will continue into the next congressional session, advancing the market-structure bill and legislation to regulate stablecoin issuers.
Hong Kong-based crypto custodian Hex Trust Group issued USDX, the first native stablecoin on the Layer-1 blockchain Flare. USDX is designed to enhance DeFi activity on Flare, be usable across lending protocols and exchanges, and feature a staking mechanism for Clearpool's T-Pool. Stakers of USDX will receive cUSDX, which can be used as collateral in DeFi protocols on Flare.
PayPal's stablecoin, PYUSD, launched on Solana, with on-ramping options through Crypto.com, Phantom, and Paxos. Jose Fernandez da Ponte, PayPal’s Senior Vice President of Blockchain, expressed interest in leveraging Solana for payments and peer-to-peer transactions with PYUSD, rather than the typical use case of trading. A few days later, PayPal announced "confidential transfers" of its PYUSD stablecoin. The feature allows merchants to keep transaction amounts confidential for consumers while ensuring visibility for regulatory purposes.
Agora, a stablecoin company that recently raised $12M in its Series A funding round led by Dragonfly, announced the forthcoming launch of its AUSD stablecoin on SUI in July 2024. AUSD is set to be the second native stablecoin in the rapidly growing Sui ecosystem, enhancing utility and accessibility.
Stable.com, led by former Consensys employee Jack Jia, said it is launching USD3, a 1:1-backed stablecoin designed for programmatic use. Set to launch on Ethereum, Polygon, Avalanche, and Linea, USD3 aims to provide developers and businesses with an interoperable transaction method and simplified DApp integration. USD3 is backed by USD or cash equivalents and will undergo regular audits for transparency and compliance.
Nomura, Laser Digital, and GMO Internet announced a partnership to explore issuing stablecoins in Japan. The alliance aims to develop JPY and USD stablecoins, leveraging GMO-Z's blockchain expertise and New York State Department of Financial Services license, and Laser Digital's experience in digital asset trading and management. The partnership will also offer a "stablecoin-as-a-service" platform to provide stablecoin opportunities to other companies.
Circle, the issuer of the USDC stablecoin, officially launched in Brazil. Partnering with BTG Pactual, the largest investment bank in Latin America, Circle said it will distribute USDC in the country, enabling institutions and individuals to access the stablecoin through the bank's services. CEO Jeremy Allaire highlighted the goal of empowering Brazilian businesses to participate more easily and efficiently in the global economy.

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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