Welcome to the Real World Assets Revolution

The convergence of traditional capital markets and the decentralized onchain economy is inevitable.

DeFi protocols house over US$100 billion of total locked value (end July 2024) – and north of US$180 billion at last bull cycle peak. Yet, the onchain economy desires quality and stable collateral that is not reflexive to the crypto system. The pain inflicted by Terra Luna in 2022 still lingers across industry players.

Tokenized representations of traditional financial assets (“real world assets” in Web3 jargon) provide the panacea the Web3 economy needs. Fiat stablecoins have already cemented status as one of crypto’s killer use cases. Future convergence is being driven by both sides: traditional financial institutions and Web3 natives. As regulatory clarity advances across the globe, RWA will evolve into a cornerstone of the industry.

Stablecoins were the first RWA primitives

Fiat backed stablecoins are the largest crypto use case today. Stablecoins represent US$160 billion of TVL, 55% of overall blockchain transaction activity and account for more than US$3 trillion in monthly transaction volume. Over 28 million wallets hold stablecoins today. Stablecoins have proven immune to bear markets, demonstrating continued growth since 2020. Equally significant, stablecoins have seen stronger adoption in the Global South, highlighting crypto’s ability to empower communities.

Even with the success achieved to date, stablecoins represent less than 1% of US dollars in circulation. We are still in the early innings of the proliferation and use case discovery of this game changing technology.

Finding Common Ground

Traditional institutions are not blind to the power of blockchains over legacy financial rails. Name your household TradFi institution and they are likely dabbling in tokenization or distribution of digital assets today: Blackrock, Goldman Sachs, Morgan Stanley, JP Morgan, Franklin Templeton, Paypal…and the list goes on. Yet, digital asset initiatives across the industry largely use permissioned blockchains. To fully unlock the onchain economy, infrastructure is required that is designed around openness and interoperability.

For Web3 natives, tokenization is not a new idea. The security token offering era came and went without identification of substantial and sustainable use cases in prior cycles. Today, we are seeing RWA gain traction in the form of US treasuries. Almost US$2 billion in demand resides in tokenized treasuries across a handful of market participants.

There is a plethora of traditional assets that has yet to find product market fit in the Web3 economy. What will be the next wave of assets to feed onchain demand?

Providing Regulatory Clarity

The final piece of the puzzle lies in establishment of clear and consistent regulation. As with many generational technologies, progress moves at different paces depending on where you sit in the globe.

Geographies across APAC have long provided constructive legislation and launched digital asset pilot projects – from Singapore and Hong Kong to Thailand to Japan and Philippines.

In the EU, the release of comprehensive MiCA crypto regulations is a step in providing clarity.

The future of US regulation is yet to be written and likely to be heavily influenced by the November 2024 elections.

It is a positive for the Web3 economy that crypto assets have become front and center in global policy making. Mass adoption will follow the provision of clear regulatory guardrails for Web3 participants to allocate capital and resources.

Join the RWA Revolution

We have a role to play in writing the next chapter. The time is now for experienced Web3 entrepreneurs and investors to build the next generation of RWA projects.

Our goal at Mu Digital is to push the frontier of onchain capital markets.

If you would like to follow the journey – hit Subscribe and stay tuned for what’s next!