Real World Assets (RWAs) in crypto have a long history, starting with fiat-backed stablecoins such as Tether (USDT), according to an update shared by CoinGecko.
However, since the introduction of DeFi in 2020, and the bear market of 2022, a more diverse variety of RWAs “have been tokenized to cater to the needs of on-chain investors.”
CoinGecko also mentioned that while RWAs “are still predominantly focused on debt / credit, other assets such as real estate, art & collectibles, etc have also piqued the interest of investors.”
Fundamentally, RWA projects live “at the intersection between the real world and blockchains, and between issuers and investors.”
Whether they can act as an effective intermediary “at these intersections will be pivotal to their success. While there will inevitably be reliance on third parties, such as oracles, custodians, credit assessors, and more, how these are effectively utilized and managed will remain crucial for their continued operations.”
Highlights of CoinGecko’s RWA Report 2024:
- Rise of Real World Assets USD-Pegged Assets Dominate Fiat-backed Stablecoins, Accounting For 99% of All Stablecoins
- Commodity-Backed Tokens Hits $1.1B in Market Capitalization, Gold Remains Most Popular Commodity
- Tokenized Treasury Products Have Grown 641% in 2023, Worth Over $861M Now
- The Demand For Private Credit Is Largely Concentrated In The Automotive Sector, Comprising 42% Of All Loans
As explained in the report from CoinGecko, Real World Assets (RWA) in crypto refers to the tokenization of tangible assets “that exist in the physical world, that are brought on chain.”
This includes the growing issuance of capital market products “on-chain, where digital securities are tokenized and offered to retail customers.”
Examples of these include real-estate, art, commodities, and even stocks “that users can purchase through permissioned platforms.”
One of the earliest forms of RWAs exist in the form of stablecoins.
The existence of stablecoins “as a tokenized version of fiat currencies allowed for a stable unit of exchange in a volatile environment.”
The CoinGecko report added that since 2014, firms such as Tether and Circle have issued tokenized stable assets that “are backed by real-world collateral such as bank deposits, short-term notes, and even physical gold.”
In 2021 and 2022, the emergence of private credit markets “through uncollateralized lending platforms such as Maple, Goldfinch and Clearpool allowed established institutions to borrow funds based on their creditworthiness.”
However, the CoinGecko report pointed out that these protocols “were affected by the collapse of Luna, 3AC and FTX, and experienced significant defaults.”
As DeFi yields cratered in 2023, tokenized treasuries “saw explosive growth as users flocked for exposure to rising US T-bill rates,” the research report added.
The report also mentioned that providers “such as Ondo Finance, Franklin Templeton and OpenEden saw massive inflows as the TVL of tokenized treasuries surged by 641% from $114M in January 2023 to $845M by year’s end.”
Of the $470.3 million in outstanding loans “made by private credit protocols, 42% or $196.0 million are used for car loans. Meanwhile, debts for the fintech and real estate sectors make up just 19%, and 9%, respectively.”
The CoinGecko team further noted that auto loans “saw a large increase throughout 2023, with over $168.0 million being lent across 60 loans. The fintech sector took out no new loans during the same period.”
Real estate and the crypto trading sectors “have received a total of 840 loans, though only 10% of the loans are currently active.”
The rest have been repaid, while some “have defaulted.”
Notably, 13 loan defaults occurred in the crypto trading sector “in the wake of the collapse of Terra and Three Arrows Capital (3AC).”
The CoinGecko report concluded that “when it comes to the demographics of borrowers, “the majority of firms are from emerging markets.”
