Things are evolving in real time.

This is the tone of the 2024 US election year. In order to win over 10% of crypto voters in the United States, policymakers will inevitably continue to introduce favorable crypto policies.

The SEC is no longer the same SEC as before. It is constantly compromising and has passed the Ethereum ETF. Many issues left over from the previous SEC and the court will also be resolved in this year's political game. We have already seen the FIT24 bill passed by the House of Representatives. With the achievement of regulatory consensus, it will inevitably promote the development of crypto innovation and the derivation of US dollar hegemony (US dollar stablecoin).

#美众议院通过FIT21法案 #EthereumEFT #LINKUSD

1. Macroeconomic data this week

This week, news of a potential Ethereum ETF took the market by surprise. Most investors were not prepared, ETH was ignored for most of this cycle, and continued underperformance even caused some long-term holders to start selling off. That all changed this week.

However, while we are seeing an increase in Ethereum buying, the volume is not as aggressive as what we saw before the ETF launch. This leads us to believe that the market is still in a wait-and-see mode. This wait-and-see mode, coupled with the FIT21 bill push, could help drive the market through the summer.

2. 2024 election year, crypto policy is generally favorable

2.1 Ethereum ETF is accelerating its approval

On May 23, the U.S. Securities and Exchange Commission (SEC) officially approved the Ethereum ETF under Form 19b-4, which will require the subsequent S-1 registration procedure. In any case, this is another milestone after the Bitcoin ETF and is seen as a major endorsement of the cryptocurrency industry.

Market perspective:

While there is no timeline for the S-1 registration process, the approval itself is considered to be very positive for the entire crypto market, which we can already see in the market's performance, especially after several key regulatory developments in recent times.

It is important to note that given the relative market size of ETH and BTC and the difference in institutional demand for these assets, fund flows may disappoint. For example, the popularity of the US ETH futures ETF in October 2023 was lower than expected; the Hong Kong spot BTC ETF has an AUM of approximately $239 million, while the ETH ETF has an AUM of $41 million, a ratio of approximately 6:1. The ratio is similar for Canadian spot ETFs, with AUMs of 2.7 billion Canadian dollars and 450 million Canadian dollars for BTC and ETH, respectively.

From a regulatory perspective, the SEC stated in its final approval document that “the proposal under consideration by the Commission in this order does not involve the Trust’s staking of Ethereum. Therefore, the practice of earning additional income or other benefits from staking Ethereum is excluded.”

It seems that the Ethereum ETF will still be listed under the "commodity-based trust share" rules. This means that the SEC has to admit that ETH itself is not a security. This will be a major policy shift for the SEC, and it can be inferred from the SEC's previous prosecution of exchanges such as Binance and Coinbase for non-securities determinations of other tokens.

2.2 House of Representatives passes crypto-friendly FIT24 bill

On May 22, the FIT 21 bill was officially passed by the U.S. House of Representatives on Wednesday. Subsequently, the bill will enter the Senate's voting process and ultimately depend on the president's signature to take effect. Previously, Biden said that if the FIT 21 cryptocurrency bill is passed, he would not veto the bill. This is also the first time that the Biden administration has expressed its willingness to work with Congress to ensure comprehensive and coordinated regulation of encrypted assets.

FIT 21 stands for Financial Innovation and Technology for the 21st Century Act. It aims to clarify the regulatory framework for cryptocurrencies and provide the industry with a safe and effective U.S. path. It also clarifies the regulatory boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and implements specific cryptocurrency trading rules to enhance protection for U.S. consumers.

The bill clearly defines "decentralized systems", which is worthy of attention.

First, a decentralized system should mean that no issuer or associated person has controlled or manipulated more than 20% of the voting rights of the total tokens in the past 12 months. This will bring challenges to the token holding share of the project foundation.

Secondly, to be considered decentralized, a project needs a "decentralized governance system" to make adjustments to the project. Here, how to govern becomes crucial.

The content of the bill will be adjusted as it becomes law. The focus should be on the bill's definition of "decentralization", which will have a huge impact on the industry.

2.3 USD stablecoins are gaining mainstream attention

According to RWA.xyz, the stablecoin market is currently valued at $159.3 billion, or approximately 0.75% of the M2 USD money supply.

On May 15, former House Speaker Paul Ryan argued that stablecoins could help the dollar become “more entrenched in the ongoing digitalization of money” and indirectly improve demand for U.S. government debt. We are gradually seeing elite policymakers begin to shift, recognize the effectiveness of stablecoins, and gradually accept them as part of the U.S. financial system.

With this shift in tone, many stablecoin issuers are gearing up for action. On Wednesday, Circle, the issuer of $USDC, announced plans to move its legal home from Ireland to the United States ahead of its IPO. In April, Ripple announced it would launch a “compliance first” stablecoin, despite its ongoing litigation with the SEC.

At the same time, we see many stablecoins integrated into Fintech applications: BVNK embeds $PYUSD, Oobit embeds $USDT.

3. Traditional finance deeply deploys crypto finance

Broadly speaking, crypto regulation can bring greater transparency, legitimacy, and verification to the industry. This will almost certainly encourage more traditional financial capital to enter the field. We have already seen the deep involvement of many traditional financial capitals in the United States.

3.1 JPMorgan’s tokenization solutions are evolving

JPMorgan Chase started experimenting with blockchain earlier. Its institutional-level blockchain payment network Onyx is currently capable of processing $2 billion in transactions per day. Onyx's transaction volume can be attributed to JPMorgan Chase's "Coin System" and "Digital Asset" solutions.

  • Coin System focuses on solving customers' cross-border payment and liquidity financing needs, using JPM Coin as the digital currency for cross-border transaction settlement.

  • Onyx Digital Asset is JPMorgan Chase’s asset tokenization platform, which has launched an intraday repo solution in partnership with Goldman Sachs, a tokenized collateral network with BlackRock and Barclays, and recently issued bonds in partnership with a local municipality.

JPMorgan Chase made several important announcements over the past week:

  • Onyx plans to launch a tokenized fund following its participation in BIS’s Project Guardian last year.

  • Onyx Systems will open its digital asset solutions to third parties.

  • Onyx is enabling its JPM Coin tokenized deposit solution for on-chain settlement on the Broadridge Platform (DLR).

3.2 Franklin Templeton: All ETFs and mutual funds will be on the chain

Franklin Templeton CEO Jenny Johnson reiterated her support for blockchain at a recent conference, believing that tokenization will "open up many new investment opportunities" in the future and eventually lead to ETFs and mutual funds being put on the chain. In an 8-month test, Franklin Templeton compared data from traditional and blockchain methods for processing account records and found that using blockchain to overcome the friction associated with different ledger systems could save "huge cost savings."

On May 16, the Depository Trust & Clearing Corporation (DTCC), the world’s largest securities settlement system that processes more than $2 quadrillion in transactions annually, and blockchain oracle Chainlink completed the pilot Smart NAV project. The project used Chainlink’s cross-chain interoperability protocol CCIP to enable the introduction of mutual fund net asset value (NAV) quote data on almost any private or public blockchain.

Market participants in the pilot include American Century Investments, Bank of New York Mellon, Edward Jones, Franklin Templeton, Invesco, JPMorgan Chase, MFS Investment Management, Mid-Atlantic Trust, State Street Corp. and Bank of America Corp.

The pilot found that by providing structured data on-chain and creating standard roles and processes, the underlying data can be embedded in a variety of on-chain use cases, opening up a variety of innovative application scenarios for the tokenization of funds.

In its simplest form, Smart NAV is, at its core, about providing the ability to provide trusted, verifiable data on (almost any) blockchain network to support the use of that data in business workflows. DTCC acts as the provider or source of that data, as well as the curator of on-chain solutions that store that data, while Chainlink’s CCIP acts as the interoperability layer. The core capabilities explored are applicable to countless use cases, ultimately driving leaner, more efficient operational processes.

This capability can support future industry exploration, not just off-chain, but focused on-chain exploration, and can also provide support for numerous downstream use cases, such as brokerage portfolio applications.

3.4 World Bank issues first Swiss franc digital bond

On May 15, the World Bank issued its first digital bond, which will be settled using Swiss franc CBDC provided by the Swiss National Bank.

The bond is a 7-year, CHF200 million digital bond rated Aaa/AAA (Moody's/S&P) and will be listed on the SIX Digital Exchange (SDX). The coupon and redemption payments for the bond will be made using tokenized CHF on SDX. SDX can be easily connected to traditional settlement systems such as Euroclear and Clearstream, allowing investors to hold bonds through traditional custodians.

The bond was sold mainly to Swiss investors, with bank vaults and corporates accounting for the lion’s share of the allocation (60%), followed by asset managers, insurance companies and pension funds (39%), with the rest being held with central banks and official institutions.

IV. RWA market hot spots and project investment and financing

4.1 Re

Re, an RWA platform focused on the reinsurance industry, has launched a tokenized reinsurance fund on the Avalanche blockchain powered by Securitize, and has received $15 million in subscriptions from Nexus Mutual. Re is targeting the nearly $1 trillion reinsurance market, with the goal of using blockchain technology to implement a decentralized reinsurance platform to rival Lloyd's of London. Following a $14 million seed round at the end of 2022, Re also raised $7 million in venture capital in its latest round of financing led by Electric Capital.

4.2 Superstate

Superstate, a compliant U.S. Treasury bond tokenization fund launched by the founder of Compound, announced that its fund shares USTB can realize on-chain P2P transfers.

This is another move after ONDO Finance launched the tokenized fund BUIDL with the help of BlackRock to realize fund share transfer, allowing the previously traditional treasury bond funds to circulate fund shares through fund tokenization.

4.3 Dinars

Dinari, an RWA project dedicated to the tokenization of securities, has launched the SolidViolet RWA DEX.

Founded in 2021, Dinari has launched dShares, a stablecoin that is 1:1 collateralized by underlying securities assets. It is built on the Arbitrum blockchain and is open to non-US users for regulatory reasons.

Dinari previously received $7.5 million in financing from investors including SPEILLLP, 500 Global, Balaji (former Coinbase CTO), SIG, Achemy Pay, etc.

4.4 Bancolombia

Colombia’s largest bank, Bancolombia, has launched a stablecoin called Wenia. Unusually, although the stablecoin is targeted at Colombian citizens, it is a separately registered and licensed stablecoin by the Bermuda Monetary Authority.

4.5 KlimaDAO

KlimaDAO is working with MUFG, Japan’s largest bank, to explore the use of the $JPYC stablecoin for tokenized carbon credit settlement.

4.6 MasterCard

Mastercard and Standard Chartered Bank in Hong Kong conducted the first live test of the Mastercard Multi-Token Network, involving tokenized asset settlement. 4.7 Glasstower

Glasstower Digital plans to use tokens from tokenized money funds for cross-border B2B payments, adding a layer of interest-bearing income to the payment logic.

4.8 ARTA FinTech

Base HK’s ARTA FinTech and Chainlink partner to bring key asset data for real estate and stablecoins on-chain.

4.9 Re.al

Tangible $USDR's sister company Re.al launches modular RWA L2. The Re.al protocol currently has nearly $40 million in TVL and more than 190 tokenized assets. The world's first RWA L2 returns 100% of the protocol revenue to ecosystem participants. The new permissionless L2 creates the best RWA chain for DeFi, solving the challenges of liquidity, interoperability, and composability of traditional assets on the chain.

Crypto.com, Tokenisation of RWAs & Yield-Bearing Stablecoins

https://crypto.com/research/rwa-tokenisation-april-2024

Grayscale, Public Blockchains and the Tokenization Revolution

https://www.grayscale.com/research/reports/public-blockchains-and-the-tokenization-revolution

McKinsy & Co., What is tokenization?

https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-tokenization

Stellar, Asset Tokenization

https://stellar.org/use-cases/tokenization

DTCC, Smart NAV Pilot Report: Bringing Trusted Data to the Blockchain Ecosystem

https://www.dtcc.com/dtcc-connection/articles/2024/may/16/smart-nav-pilot-report-bringing-trusted-data-to-the-blockchain-ecosystem

Chainlink CCIP and data services

https://x.com/nullpackets/status/1791898725096575197



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This article is for learning and reference only. We hope it is helpful to you. It does not constitute any legal or investment advice. Not your lawyer, DYOR.