In the Netflix series RWA Tokenization, the revolution happens when the charismatic ragtag banditos overwhelm the palace in a fiery shootout that ends with the sudden overthrow of the corrupt regime.
The mass tokenization of real-world assets would represent something like that: the overthrow of your granddad’s tech infrastructure, his feudal business models, and his exploitative marketplace. Suddenly now bonds, stocks, funds and structured products will all be stored, traded, and settled on blockchain, bringing with it transparency, immutable records of ownership, and downstream benefits like fractionalization, because this is a people’s revolution!
Strangely, in early episodes of this revolution, you see some of the old dons in their haciendas sporting Che Guevara T-shirts and waving little red books. Such as Don Larry who runs the biggest buy-side latifundo in the world.
“ETFs are step-one in the technological revolution in the financial markets,” said the don. “Step two is going to be the tokenization of every financial asset.”
The landowners strike back
He must be a traitor to his moneyed landowning class, because Don Larry’s latifundo, Blackrock, launched a Bitcoin tracker exchange-traded fund last January that raised more than $40 billion. This was one of the most successful ETF launches of all time, vaulting it into the top 1 percent of ETFs by assets under management. ¡Viva la revolución!
The royal Houses are also dabbling with dangerous ideas. House StanChart has been establishing a variety of digital-assets businesses, from custody to tokenization platforms. It recently announced it’s in a joint venture to issue Hong Kong dollar-based stablecoins, and last year the bank predicted tokenizing trade-finance instruments would reach $30 trillion of assets by 2030. Let a trillion tokens bloom!
But where’s the big gunfight, you ask? When do the landowners surrender? Patience, comrade!
For in this revolution, the aristos are on our side.
The great royal Houses have established their own tokenization platforms, including J.P. Morgan’s Nexus, HSBC’s Orion, and UBS Tokenization, while DBS has its own crypto exchange and Goldman Sachs has spun out GS DAP as a standalone tokenization business.
Imagine if, when Washington and his band of rebels crossed the Delaware, they were greeted on the other side by the king of England with a welcoming smile and an updated Magna Carta that included recognition of what counts as a security. “What the hell?” demands Thomas Jefferson, brandishing the Declaration of Independence, but then he reads the king’s fine print and shrugs. “I can work with this.”
And in our revolution, monarchs and warlords are keen to shepherd it along. The new Trump administration in the US is expected to push through legislation to provide clarity and support to digital assets. It is playing catchup with other jurisdictions. Many places in Asia have different pro-digital asset regimes in place or in gestation, including Hong Kong, Singapore, Japan, Australia, Korea and Dubai.
With class enemies like these, who needs friends?
Enter the shadowy crusaders
Ah, but here’s the show’s plot twist: these rebels are traitors to their own cause! The true revolutionaries are ignoring the worldly entreaties of the landowners. These aren’t just your ordinary resistance fighters: these are ascetic monks of a secret new religious order, servants of the god Number Go Up. Nothing the landowners say or do will sway them, even if they are prepared to occasionally take advantage of the hapless regime’s pathetic efforts to mollify them.
And in the remote mountain monasteries, the monks have learned to suborn real-world tokens for their own purposes. First, they learned to hijack the government’s filthy fiat money – because it turns out that while Number Go Up, it also goes down, quite a lot, and while the ascetics understand this is a test of faith, it doesn’t hurt to tokenize filthy fiat and use it as a place to vouchsafe your other tokens. They uploaded the dollar to the blockchain, and lo was born unto the world: the stablecoin.
The stablecoin is the first real-world asset to be successfully tokenized, and total stablecoin values onchain are now $221 billion, according to RWA.xyz, an illuminated manuscript maintained by some of the monks. And 149 million followers hold these stablecoins, blessed be the fruit!
The revolution begins: stablecoins
So what’s next? Both the revolutionaries and the jihadis are fighting for more than cash to be tokenized, but for different reasons, and with the landowners trying to play them off each other.
The landowning great Houses want to own the means of production but transform it into tokenized form, because this would allow them to generate new businesses atop securities that can trade and settle almost instantly, thus letting them get rid of all the serfs involved in pre- and post-trade reconciliation.
You’d be amazed at how many serfs there are working these plantations! What would happen to these serfs if they were no longer needed? Who gives a shit! They can be replaced by an idea invented by one of the first rebels called a smart contract. Like the Holy Roman Emperor, which was anything but, this software is neither that smart, nor is it a legal contract, but it can automate and even make tokens programmable. Programmable ducats! Your code, your keys.
The battle of money markets
The jihadis, meanwhile, don’t care about don Larry’s next tokenized fund, or getting their next corporate bond from House UBS. They only care about serving Number Go Up. But when their god is taking a cigarette break, and number go down, they find it useful to cynically take advantage of yields offered by the landowners.
For example, in 2021, after many fissures among the landowners, the price of borrowing ducats went from zero to more than 5 percent. Meanwhile, the yields on jihadi caravan networks, aka decentralized lending protocols, collapsed. Suddenly the serfs were making more than the monks, just by keeping their money in don Larry’s money-market funds!
Some of the monks, such as a monktech called Ondo, got the clever idea of creating their own real-world money-market fund, and replicating a synthetic version of this on blockchain. Now those 149 million acolytes holding stablecoins that yielded zero could swap for tokens yielding 5 percent. And they could simply clip coupons on those tokenized funds, or use them as collateral in other blockchain markets.
Thus did RWA tokenization take its next step beyond tokenized cash.
BUIDLing an alliance
But what happened? The landowners – ones like Don Larry – realized that they also had the product that the acolytes wanted, and theirs were way bigger, with lots of liquidity. So why leave it to startup monktechs to get rich?
And lo, Larry issued a tokenized short-term liquidity fund. He was even quick enough to misspell it, because many acolytes, despite their long hours in the monastery pouring over illuminated manuscripts, can’t actually read. They just like the pictures, like those of Saint Ape the Bored. So Don Larry issued the BUIDL token and raised $657 million! Genius!
(Another plot twist: a lot of that AUM is actually from a second Ondo fund token, this one that invested in…BUIDL! The monktech became don Larry’s new distribution channel! Blackrock is still a landowner and its token doesn’t redeem quite as 24/7 as a crypto native one, but BUIDL hodlers can use the Ondo tokenized version to play in DeFi markets with instant liquidity…Number Go Up works in mysterious ways!)
Cliffhanger!
Although all of this is exceptionally crafty, the actual amount in tokenized short-term US debt is a modest $3 billion.
Most RWA tokens, other than stablecoins, are private credit. These are built upon bilateral loans with a dollop of financial engineering, but liquidity terms and other secrets of the holy orders are bespoke and difficult to discern. Nonetheless these average a yield of 9.4 percent, according to the illuminated manuscripts, or double what you can get from tokenized US debt. And so private credit tokens are the most popular form of RWA, O great Number Go Up, hallow be thy name.
So ends Season 1 of RWA Tokenization, right on a cliffhanger. Will the revolution overturn the old regime? Will Don Larry and the royal houses retain their hold on finance, or will the rebels seize the commanding heights? And which rebels – those ready to partner with the landowners if it brings them power, or the mass crusaders of Number Go Up?
Stay tuned next week for Season 2!
