#290—Ripple hops aboard the stablecoin train

The BIS also wants to tokenize money

Apr 08, 2024

Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out our last report here.

This week:

Ripple hops aboard the stablecoin train
The BIS also wants to start tokenizing money
Chart of the week: DeFi is back
What we’re reading: Secret of BlackRock’s tokenized fund
Stuff happens

1. Ripple hops aboard the stablecoin train

XRP isn’t inherently a security, according to the courts, but Ripple’s latest strategic pivot is focused beyond its native cryptocurrency.

Here’s Bloomberg:

Blockchain developer Ripple Labs Inc. plans to introduce its own dollar-denominated stablecoin, joining a long list of upstarts in a corner of cryptoassets long dominated by Tether Holdings Ltd.
Ripple’s stablecoin, designed to maintain a constant value of $1, will start trading later this year, Chief Executive Officer Brad Garlinghouse said in an interview. It will be backed by a one-to-one reserve of US dollar deposits, short-term US government bonds and other cash equivalents.
The token will distributed on Ethereum and the XRP blockchain Ripple helped create, Garlinghouse said, adding that no decision has been made on which exchanges it will initially trade on.
…
Ripple plans to publish monthly attestations on its stablecoin’s reserves, Garlinghouse said, adding that they will be conducted by a third-party accounting firm which Ripple has yet to hire. The attestations will include information on which banking partners the firm is using to custody assets, he said.

Relevant:

2. The BIS also wants to start tokenizing money

It’s called Project Agora (via Chris Lewis):

The Bank for International Settlements (BIS) together with seven central banks today announced plans to join forces with the private sector to explore how tokenisation can enhance the functioning of the monetary system.
Project Agorá (Greek for "marketplace") brings together seven central banks: Bank of France (representing the Eurosystem), Bank of Japan, Bank of Korea, Bank of Mexico, Swiss National Bank, Bank of England and the Federal Reserve Bank of New York. They will seek to work in partnership with a large group of private financial firms convened by the Institute of International Finance (IIF).
The project builds on the unified ledger concept proposed by the BIS and will investigate how tokenised commercial bank deposits can be seamlessly integrated with tokenised wholesale central bank money in a public-private programmable core financial platform. This could enhance the functioning of the monetary system and provide new solutions using smart contracts and programmability, while maintaining its two-tier structure.

3. Chart of the week: DeFi is back

Decentralized exchange or DEX volume hit a new all-time high last month:

Chart: DeFiLlama

Relevant:

Via Sam Ostler—State of Solana Q1 2024
Wormhole Debuts at $3B Valuation in 617M Token Airdrop

4. What we’re reading: Secret of BlackRock’s tokenized fund

Here’s Anton Golub (via Greg Kidd):

Secret to the success of BlackRock’s BUIDL token is that crypto exchanges have started to accept BUIDL tokens as COLLATERAL for margin trading.
Traders can purchase tokenized US bond funds - and get yield from them - but also use those tokens on derivatives exchanges as collateral for margin trading.
…
Previously, the only “use-case” of tokenized RWAs was to buy such tokens and then just hold them in your wallet to earn yield…
Now, the “velocity” of tokenized RWAs has increased since such tokens can be reused in the crypto exchange ecosystem as collateral for margin trading, which increases the liquidity of RWA tokens.
What I described with BUIDL tokens should be familiar to everyone who worked in Traditional Finance…
When you work in a big hedge fund, you never have any cash!
All of the capital in the hedge fund is fully invested in safe assets - US bonds or money market funds - and then you pledge those safe assets with your prime broker as collateral to do trading.
Prime brokers accept highly liquid and safe assets as collateral in margin trading since in case of liquidation the broker can sell such assets - what better than US government bonds, since those are the most liquid on the planet!
Tokenized RWAs are FINALLY finding their use-case - collateral for margin trading with crypto derivatives exchanges.

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