Coinbase to launch tokenized money-market fund

Coinbase will join the RWA tokenization trend, by offering a new money market product. The launch will follow the $500M BlackRock tokenized fund. 

Coinbase plans to offer its own product, based on a money market fund. The trend follows attempts to build real-world asset tokenization, to utilize existing crypto trading platforms with price action from legacy finance. 

Money markets are one of the easiest and most intuitive to tokenize, while containing a relatively predictable amount of risk. Money markets are based on short-term debt, leading to low risk, but also low returns. Their pricing data is also easily fetched via oracle technology and translated into tokens. 

The Coinbase fund is following the model of the BUIDL token, and will onboard investors more conservatively. 

🤯 First Blackrock Now Coinbase@coinbase is launching an #RWA fund, inspired by BlackRock’s $500M BUIDL fund success

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— Opulous (@opulousapp) July 25, 2024

The money fund will be targeted to large-scale investors and extend the Project Diamond program. Coinbase has earned sandbox regulatory access with the Financial Services Regulatory Authority Abu Dhabi (FSRA) for special conditions on tokenized products. For now, there are no specifics on the money market targeted for tokenization. 

The goal of Coinbase is to show it has robust infrastructure and to bring institutions that want to use Base for tokenizing their products. At first, the opportunity will be open to institutions from outside the US jurisdiction. 

Creating tokens remains extremely easy, but in the case of money funds, it also means building real acceptance for the product. Additionally, the goal would be to expose the Base platform to new use cases and popularize it with investors without direct access to crypto trading.

Crypto natives bring tokenization up to speed

A much easier form of tokenization is to just generate tokens that track the price of traditional assets, especially stocks. Previously, chains like Algorand partnered with Archax to serve as the transfer layer for EURD tokens.

No strict definition exists for RWA projects, and sometimes, even stablecoins are grouped with the trend. 

Some of the most popular RWAs include those that track the hottest stocks, including Tesla (TSLA) and Nvidia (NVDA). No strict regulation exists on the right way to tokenize assets, and multiple chains and platforms can try to settle the same type of stock. Gold-backed tokens are also offering different approaches, either storing physical gold or simply tracking the price of gold. 

There is also no specific tracking for RWA assets, as some of them remain niche. The trend has served mostly as a narrative, and was added as a use case for some of the most active networks. 

Current data for RWA assets show 98 officially tracked tokens, with a value of $13.18B. The most common types of RWA include private credit, or money markets making up 75% of tokens. Tokenized commodities make up $874M, and the rest of the tokens correspond to $1.9B in US corporate debt. RWA are still emerging even without specific approval or regulation, and are not included in the statistics. Stocks have a smaller share of around $6M, with growth from $4M in the past few months. 

Ethereum carries the most US government bonds, but Stellar, a largely forgotten network, has drawn in $433M in treasuries tokenization. Solana also has a share of RWA assets, though still at an earlier stage, with a value of $47M.

Blackrock’s BUIDL token relies on ONDO Finance

The model of money-market tokens is BUIDL, created by BlackRock. The tokenized money market reportedly drew in $500M as of July 2024. The money market fund is open only to pre-listed accredited investors, with a minimum purchase of $5M. 

Despite the reported investments, the BUIDL token itself is relatively inactive. The asset, tokenized as an ERC-20 on Ethereum, has only 19 known holders. ONDO remains the biggest buyer, as part of its performance as a RWA protocol. ONDO is the owner of around 42% of all BUIDL tokens, and until recently, the only crypto insider that invested in the project.

The BUIDL token was generated by Securitize, and is no different than other Ethereum-based tokens. The asset can be transferred to wallets, or used in smart contracts. Recently, the BUIDL token was adopted by Ethena, as a way to allocate its liquid reserves to low-risk assets. RWA tokenization from reliable institutions may also work as a safer collateral.

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Cryptopolitan reporting by Hristina Vasileva