Yielding RWA Report: US Treasuries Drive rise, User Demand Surges

There are various types of RWA on the blockchain, each with its own characteristics, suitable for different scenarios. While certain RWAs, such as stablecoins and tokenized gold, have existed for years, other types of RWAs, like U.S. Treasury bonds, have emerged recently with rising interest rates. This article will briefly introduce the following types of income-generating RWAs:

• Real Estate
• Private Credit
• National Debt

Note: The following analysis focuses on RWA tokenized assets and their market value. It does not include information related to underlying protocols or auxiliary services. To avoid obscuring the rise of other smaller market cap RWAs, stablecoins are not included in the report charts and TVL calculations.

Integration of the real world and the digital world

RWA is created by issuers who complete one or more of the following activities:

• Acquire real-world assets
• Tokenize assets on the chain
• Distribute RWA tokens to on-chain users

Without an issuer, RWA cannot exist on the chain.

Some noteworthy RWA issuers include:

• Centrifuge( has an active issuance of RWA valued at $238 million): the largest on-chain private credit loan issuer.
• Franklin Templeton( actively issued RWA valued at $310 million): a traditional financial institution that issues tokenized government bonds.
• Wisdom Tree( actively issued RWA worth $11 million ): Institutional capital market company tracking treasury issuance.

This highlights the situation where off-chain entities back on-chain RWAs. Franklin Templeton and WisdomTree are two seasoned traditional financial companies whose main businesses are unrelated to cryptocurrency. Franklin Templeton was established 76 years ago and provides products such as mutual funds to individuals and institutions, managing assets of $1.5 trillion. WisdomTree was founded in 1985 and offers a diverse range of exchange-traded products, managing assets of $95.948 billion.

In recent years, these companies have begun to experiment with RWA, meeting the demands of institutional clients by tokenizing traditional financial instruments. Although still in the early stages, the issuance of RWA by traditional financial companies is expected to attract a large number of new users into the crypto space.

income-generating RWA rise

As of September 30, the market value of RWA reached 2.49 billion USD, a decrease of 9.6% from the peak of 2.75 billion USD on April 19. Despite strong growth in government bond-related RWA, the active loans from private credit issuers have significantly decreased, causing the market value to fall below historical highs.

From January 31 to September 30, the value of non-stablecoin RWA rose by $1.05 billion. The additional $855.7 million over the past three quarters came from government bonds and other bonds, real estate, and private credit.

Private Credit

Private credit is a form of financing provided by non-bank institutions. Since the 2008 financial crisis, increased regulation has significantly contributed to the rise of the private credit market. In the current interest rate cycle, this trend has further expanded. Private credit offers borrowers flexibility and floating rates to lenders. As of August 2023, the global private credit loan market is valued at $1.5 trillion.

From January 1 to September 30, the active value of on-chain private credit loans rose by $210.5 million (84%). Most of the rise (74%) came from Centrifuge, with an outstanding loan balance increasing by $155.7 million. Clearpool experienced the largest relative change in the past three quarters, with a loan balance rising by 966% to $23.96 million. Clearpool has cumulatively issued over $400 million in private credit loans.

Despite a rise in 2023, the total value of on-chain private credit loans is still 70% lower than the historical high of $15.4 billion on May 15, 2022. As the Federal Reserve significantly raised interest rates, active loans saw a substantial decrease.

Users earn significantly higher returns on on-chain private credit loans by depositing stablecoins compared to returns obtained through DeFi lending protocols. From January 1 to September 30, the average daily interest rate difference between the two is 7.7%.

It should be noted that the risk conditions for depositing into DeFi lending protocols and for depositing into private credit loan tokens are different. Most DeFi loans are over-collateralized, while private credit loan tokens may not be collateralized.

real estate

Real estate includes tangible assets such as residential, commercial buildings, and land. It is attractive to investors because it has the potential to generate passive income through rent and other means. In 2023, real estate is the world's largest asset class, valued at approximately $613 trillion.

Among all yield-bearing RWA categories, on-chain real estate has seen the least rise. From January 1 to September 30, the total value of these tokenized assets was $178 million. RealT tokens are the largest issuer, accounting for 49% market share. Tangible has experienced the strongest growth this year, with total locked value increasing from $100,000 to $64 million.

Government bonds and other bonds

US Treasuries are considered the safest and most reliable income-generating assets. In contrast, corporate bonds carry higher risks but may offer higher returns. The global bond market was valued at $133 trillion in 2022, and in the first three quarters of 2023, US companies issued $1.02 trillion in corporate bonds.

The tokenized government bonds and other bond values increased by $557.05 million from January 1 to September 30. Ondo Finance, Franklin Templeton, and Matrixdock are the top three issuers, with a total issuance of $572.05 million, accounting for 85%, with $468.5 million newly issued this year.

Frigg.eco issues bonds related to sustainable infrastructure developers, more like corporate bonds. stUSDT is another tokenized national debt asset with a market value of around $1.8 billion, but it has faced criticism for lack of transparency.

For nearly 18 months, the short-term U.S. Treasury yield has been higher than the yield on stablecoin deposits. In 2023, the average daily interest rate differential between the two is about 3%. In contrast, the yield spread between AAA-rated corporate bonds and on-chain stablecoin yields is 2.7%.

( prospect

The demand for returns from native crypto users has driven the rise of on-chain RWA. This year, approximately 82% of the newly added RWA value comes from income-generating assets. In the total RWA market value, the share of income-generating RWA has nearly doubled from 31% on January 1 to 53% on September 30.

![Yield RWA Report: US Treasuries Drive Yield rise, Native Crypto User Demand Soars])https://img-cdn.gateio.im/webp-social/moments-25ef986c17448071bb84e55bfd6d21c5.webp###

From 2021 to 2023, the Federal Reserve's policy shift raised the benchmark interest rate to its highest level since 2007, creating new demand for RWA users.

Most RWA users are crypto-native users, rather than newcomers or traditional investors. The average user address interacting with RWA tokens was created before these assets.

As of August 31, 2023, 3,232 unique addresses hold major RWA assets. The average address age is 882 days, while the average age of RWA assets is 375 days. 20% of addresses began on-chain transactions before 2023.

Many new RWA users hold assets from Franklin Templeton and WisdomTree, indicating that traditional financial companies are attracting new users into the crypto space, although most are still native users.

( RWA means real-world risks and limitations.

Although many RWAs are issued on public chains, they do not provide users with barrier-free access. Users often need to complete KYC/AML verification and other requirements to participate. RWAs are subject to similar or greater restrictions and have not expanded the accessibility of financial instruments.

RWA also presents unique risks. For example, private credit loans may be unsecured, and on-chain depositors face the risk of borrower default. Issuers must address this through risk/return positioning and transparent governance.

) The Federal Reserve's policy is crucial.

The Federal Reserve's actions have greatly promoted the adoption of RWA. The interest rate hike has made off-chain yields more attractive and has also changed the most valuable types of RWA. In Q2 2022, private credit RWA accounted for 56%, while government bond RWA accounted for 0%. By Q3 2023, private credit had dropped to 18%, while government bonds increased to 27%. The Federal Reserve's policies impact the expansion and layout of RWA DeFi.

![Yield RWA Report: US Bonds Drive Income Rise, Surge in Demand from Native Crypto Users]###https://img-cdn.gateio.im/webp-social/moments-1080ba9b3184fb8dbeb90ad92d5df57a.webp###

( conclusion

The rise of RWA is mainly driven by the demand from native crypto users, rather than new users. However, the participation of traditional financial companies shows the potential to attract new users. The momentum of RWA is strong in 2023, with many close to historical highs. Changes in the macro environment and user demand will continue to influence the development of this field.

![Yield-bearing RWA Report: US Treasury Drives Yield rise, Surge in Demand from Crypto Native Users])https://img-cdn.gateio.im/webp-social/moments-066502afd1344a2735ead2052ff5eb97.webp###