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Why Money Market Funds Became the Institutional Gateway to Tokenized Yield: A Case Study in Viable Financial Innovation

Posted on June 15, 2026 by stg3

Executive Summary

The tokenization of yield-bearing assets has become one of the most significant infrastructure developments in institutional finance since the emergence of electronic trading. Yet contrary to prevailing narratives about blockchain’s transformative potential, the most successful implementation has been profoundly unglamorous: the tokenization of money market funds.

This analysis examines why money market funds—among the least exciting financial instruments—became the proving ground for institutional-grade tokenized assets, and what this reveals about the actual mechanisms by which disruptive financial technology achieves meaningful adoption at institutional scale.

The evidence suggests that sustainable financial innovation succeeds not by promising revolutionary change, but by solving specific, acute operational friction points within existing market structures.

The Tokenization Graveyard: Why Most Projects Failed

The initial wave of asset tokenization (2020-2022) was characterized by ambitious scope and minimal constraint. Projects sought to tokenize:

Fractional real estate ownership
Fine art and collectibles
Small business equity
Commodities futures
Exotic derivatives

The underlying thesis was consistent across these initiatives: blockchain technology could overcome the liquidity constraints that had historically made certain asset classes difficult to trade, inaccessible to retail investors, or operationally cumbersome to manage.

This thesis contained a fundamental error that became apparent only through empirical testing: tokenization does not create liquidity. It merely represents existing assets in a different format.

An illiquid asset, when represented as a token, remains illiquid. The market participants who would purchase the asset must still exist. The regulatory constraints that made the asset difficult to trade must still be addressed. The fundamental economics must still work.

What emerged from this period was a critical realization: tokenization is a tool for optimizing how existing markets function, not for creating entirely new markets where none existed before.

This distinction proved decisive in determining which applications would achieve institutional adoption.

Money Market Funds: The Obvious Choice, Recognized Belatedly

Money market funds occupy a peculiar position in financial markets. They are:

Universally understood: Institutional investors, fiduciaries, and regulators possess decades of experience with MMF mechanics, risk characteristics, and operational requirements
Massively scaled: The global MMF market exceeds $7.8 trillion in assets under management
Regulatory clarity: Securities regulators worldwide have established comprehensive frameworks governing MMF issuance, disclosure, and operation
Genuinely liquid: MMFs are already traded in secondary markets with sufficient volume to ensure efficient price discovery
Yield-generating: Despite low absolute yields in historical context, MMFs provide meaningful returns in contemporary interest rate environments

The proposal to tokenize MMFs was not conceptually innovative. It was structurally obvious. Yet this very obviousness appears to have delayed recognition of its significance.

Financial markets often focus on novel applications rather than incremental improvements to existing infrastructure. The tokenization community, emerging from cryptocurrency culture, showed particular enthusiasm for novel use cases. MMF tokenization was dismissed as insufficiently interesting.

This misjudgment proved consequential.

The Dual Utility Breakthrough

The strategic insight that unlocked institutional adoption of tokenized MMFs was not the tokenization itself, but rather the novel functionality that tokenization enabled: simultaneous yield generation and collateral utility.

In traditional financial markets, these functions remain operationally segregated. An investor holds a yield-bearing asset in one account and maintains collateral in separate venues under distinct custody and operational arrangements. The functions are conceptually related but operationally divorced.

Tokenized MMFs enable structural integration of these functions:

Yield Generation: The underlying money market fund continues to generate yield at rates consistent with market conditions and fund expense ratios
Programmable Collateral: The tokenized representation can simultaneously serve as acceptable collateral in onchain lending, leverage, and trading operations
Instantaneous Settlement: Collateral positions can be rebalanced, transferred between venues, or liquidated without the multi-day settlement cycles inherent in traditional markets
Continuous Availability: Trading and collateral operations occur 24/7, eliminating settlement windows and operational constraints

For digital-native hedge funds and sophisticated institutional traders, this functional integration created material operational advantages:

Traditional Approach:

Hold MMF in traditional custody (T+2 settlement)
Maintain separate collateral arrangements with prime brokers
Manage collateral across multiple venues
Rebalance collateral daily, constrained by settlement cycles
Pay multiple service providers (custodian, prime broker, collateral manager)

Tokenized Approach:

Hold tokenized MMF onchain (T+0 settlement)
Use same asset as collateral
Manage collateral across integrated venues
Rebalance collateral intraday without settlement constraints
Unified operational interface

The economic value of this integration became immediately apparent to sophisticated participants. Hedge funds were willing to accept fee premiums (8-12 basis points versus 2-5 basis points for traditional MMFs) to access this functionality.

Institutional Adoption Mechanics: Following Regulatory, Not Distribution, Strategy

An important strategic pattern emerged from actual institutional deployments of tokenized MMFs: regulatory approval proved to be the binding constraint on expansion, not market demand or technological capability.

Multiple asset managers launching tokenized MMF products reported that internal business planning assumed distribution as the primary expansion vector—leveraging existing client relationships and distribution networks to rapidly scale across geographies.

Actual experience followed a different pattern. Regulatory approval in each jurisdiction proved necessary before meaningful distribution could be undertaken. More significantly, regulatory approval itself unlocked distribution naturally, as institutional clients could only comfortably adopt products with clear regulatory blessing.

The observed expansion pattern was:

Phase 1: Regulatory Approval

Obtain regulatory approval in primary jurisdiction (typically US SEC approval)
Establish compliant fund structure
Deploy infrastructure for compliance, custody, and reporting

Phase 2: Jurisdictional Expansion

Seek regulatory approval in secondary jurisdictions
Adapt fund structure to local regulatory requirements
Establish local custody and operational arrangements

Phase 3: Market Development

Distribution to institutional clients follows regulatory approval
Organic demand emerges from clients observing regulatory validation
Use cases and applications develop naturally once regulatory foundation is established

This pattern contradicts the assumption that distribution channels and market demand pull regulatory approval. Instead, regulatory approval proves to be the prerequisite for institutional adoption, not a constraint to be overcome through alternative strategies.

For Franklin Templeton, the largest institutional issuer of tokenized money market funds, this pattern manifested as:

United States: SEC registration and approval
European Union: UCITS-compliant vehicle registered with Luxembourg financial authority
Asia-Pacific: MAS (Monetary Authority of Singapore) registration and approval
Offshore: BVI private fund registration

Each regulatory achievement unlocked institutional demand in that jurisdiction that had previously been latent.

The Problem Tokenization Actually Solved

Analyzing institutional demand for tokenized MMFs reveals that the product does not solve the problem typically emphasized in blockchain marketing materials: “democratizing access” or “removing intermediaries.”

Rather, tokenized MMFs solve a specific operational problem within institutional markets: how to make high-quality liquid collateral continuously available without settlement friction.

In traditional markets, collateral management involves:

Collateral Fragmentation: High-quality collateral is held in multiple venues—cash accounts, securities depositories, prime broker arrangements
Settlement Friction: Moving collateral between venues requires multi-day settlement, creating operational delays
Operational Cost: Managing collateral across multiple venues requires parallel compliance, reporting, and reconciliation systems
Rebalancing Constraints: Collateral rebalancing is constrained by settlement cycles; intraday rebalancing is operationally complex

For hedge funds managing multiple trading operations, prime brokerage relationships, and leverage positions, these constraints create genuine operational drag. Collateral sits idle during settlement windows. Optimal collateral allocations cannot be implemented due to settlement timing. Multiple layers of fees and intermediaries extract value at each interface.

Tokenized MMFs eliminate these specific friction points:

Unified Ledger: All collateral positions visible on single ledger
Instantaneous Settlement: No waiting for settlement cycles
Programmable Rebalancing: Collateral positions can be reoptimized continuously
Single Service Provider Interface: One custody arrangement replaces multiple relationships

The economic value is not theoretical. Quantifying the value of continuous collateral availability, elimination of settlement friction, and reduction of idle capital is straightforward: institutions are willing to pay fee premiums to access these capabilities.

Lessons for Future Tokenization Projects

The success of tokenized MMFs provides several empirically-grounded principles for future tokenization initiatives:

1. Identify Specific Operational Friction

Successful tokenization targets specific, quantifiable operational problems within institutional workflows. The problem should be:

Recurrent: The friction manifests continuously, not episodically
Measurable: The cost of the friction can be quantified (settlement delays, operational staff, capital costs)
Solvable by Tokenization: Blockchain infrastructure directly addresses the friction (not just a feature that could be added to traditional infrastructure)

Tokenizing inherently illiquid assets, “democratizing access” to previously unavailable assets, or implementing features that could be added to traditional infrastructure do not meet these criteria.

2. Establish Regulatory Clarity First

Institutional capital is substantially risk-averse regarding regulatory status. Products lacking clear regulatory approval, occupying regulatory gray areas, or dependent on favorable regulatory interpretation do not attract institutional participation.

This does not mean regulatory approval must be obtained globally before launching. Rather, clear regulatory status in at least one major jurisdiction (US, EU, Asia) must be established before substantial institutional demand can be expected.

3. Build on Existing Market Infrastructure

Tokenized products that integrate seamlessly with existing custody, settlement, and compliance infrastructure scale more rapidly than those attempting to replace traditional infrastructure.

This appears counterintuitive—why would blockchain-based infrastructure integrate with the traditional systems it supposedly aims to replace?

The answer is institutional risk management. Custody responsibility, insurance coverage, regulatory liability, and audit trails cannot be fully replaced by blockchain infrastructure. They must be maintained and clarified. Integration with existing arrangements is therefore preferable to replacement.

4. Focus on Institutional Problems, Not Retail Narratives

The most successful tokenization initiatives solve problems experienced by institutional market participants with operational complexity, regulatory obligations, and significant capital flows. These are not the constituencies that blockchain culture typically emphasizes.

Retail investors, democratized access, and disruption of traditional finance are compelling narratives. They do not describe the actual mechanisms by which billions of institutional capital enters tokenized asset markets.

The Timeline Question: Why Compression Is Slower Than Expected

A recurring question in institutional discussions concerns fee compression: if blockchain infrastructure is demonstrably more efficient, why do tokenized assets not immediately compress toward zero-fee pricing?

The answer involves understanding how institutional pricing actually works:

Pricing incorporates multiple components:

Asset management fee (reflecting the cost of managing the underlying asset)
Technology infrastructure fee (custody, settlement, reporting systems)
Service provider margin (compensation for operational risk and expertise)
Feature premium (compensation for novel functionality not available in traditional products)

In traditional MMFs, these components total 5-15 basis points annually. Tokenized MMFs command 8-20 basis points—a premium, not a discount.

The premium reflects the feature premium: collateral functionality and operational integration that traditional MMFs cannot provide.

This premium will compress—as standardization increases, multiple competitors emerge, and collateral functionality becomes industry-standard rather than differentiated. However, the compression timeline is measured in years, not months, because:

Standardization is slow: Infrastructure, regulatory frameworks, and industry practices evolve gradually
Functionality evolves: New utilities emerge continuously (leverage mechanics, principal/coupon strips, complex derivatives), extending the period in which novel features command premiums
Market structure is complex: Institutional pricing incorporates custody, liability, insurance, and regulatory factors that blockchain infrastructure cannot unilaterally change

Understanding this timeline is critical for founders, investors, and institutions evaluating tokenized asset opportunities.

Implications for Broader Tokenization Strategy

The success of tokenized MMFs, in its specificity and limitations, provides a template for evaluating other tokenization opportunities:

High-probability candidates for institutional adoption:

Assets with existing operational friction that tokenization specifically addresses
Markets where regulatory frameworks are already clear
Use cases that integrate with, rather than replace, traditional infrastructure
Institutional problems with quantifiable economic value
Markets large enough that margin compression does not eliminate economic viability

Lower-probability candidates:

Assets where tokenization value proposition is primarily “democratization”
Use cases requiring new regulatory frameworks or regulatory interpretation
Applications that require replacement of existing custody, settlement, or compliance infrastructure
Retail-focused value propositions
Niche markets where margin compression quickly eliminates economic viability

Conclusion: Boring Innovation as Institutional Reality

The tokenization of money market funds represents a specific type of financial innovation: incremental, unglamorous, focused on solving existing operational problems within established markets, constrained by regulatory requirements, and dependent on integration with traditional infrastructure.

This profile differs substantially from how blockchain technology is typically characterized. The narrative typically emphasizes revolutionary disruption, elimination of intermediaries, democratized access, and replacement of traditional infrastructure.

The actual institutional adoption of tokenized yield-bearing instruments follows a more modest pattern: operational optimization, integration with existing infrastructure, regulatory clarification, and institutional focus.

This distinction has important implications. Revolutionary innovations are inherently uncertain—they may succeed dramatically or fail entirely. Incremental innovations are more predictable—they involve risks of execution and market timing, but face lower technical and conceptual risk.

The success of tokenized MMFs suggests that institutional blockchain adoption will be characterized by incremental optimization rather than revolutionary disruption. This is less exciting narratively, but potentially more durable economically.

For institutional investors, founders, and regulators, this suggests that the most promising blockchain applications in finance are not those promising the most dramatic change, but those solving specific, identifiable operational problems within existing market structures.

Money market funds, in their operational mundanity, may prove to be the template for meaningful institutional adoption of tokenized assets.

The Biggest Depegging of Them All / Ziv Keinan

Posted on April 20, 2025June 18, 2026 by stg3

In the quiet corridors of monetary history, few events have reverberated with such profound implications as the abandonment of the gold standard by the United States in 1971. This wasn’t merely a technical adjustment in financial policy—it was perhaps the most consequential depegging in modern economic history, forever altering the landscape of global finance and challenging our fundamental understanding of money itself.

The Golden Age of Certainty

For much of human civilization, gold served as the bedrock of monetary systems. Its inherent scarcity, durability, and universal appeal made it the perfect anchor for currency valuation. As economic historian Barry Eichengreen notes in his seminal work “Golden Fetters: The Gold Standard and the Great Depression,” the gold standard represented “a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold” (Eichengreen, 1992).

This system provided a remarkable degree of stability and predictability. Central banks maintained reserves of gold, and currencies could be redeemed for their equivalent in the precious metal. The arrangement created what economic historian Michael Bordo called a “contingent rule”—a framework that constrained government action and provided confidence in the long-term value of money (Bordo & Kydland, 1995).

Bretton Woods: The Compromise

The devastation of World War II necessitated a reimagining of the international monetary system. In July 1944, delegates from 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, to architect a new financial order. The resulting Bretton Woods Agreement established what historians sometimes call the “gold-exchange standard”—where the U.S. dollar was pegged to gold at $35 per ounce, and other currencies were pegged to the dollar.

As Fred Hirsch documented in his classic text “Money International,” this system made the dollar the world’s reserve currency while maintaining an indirect link to gold. It was, in essence, a compromise between the rigid discipline of the classical gold standard and the flexibility needed for post-war economic reconstruction (Hirsch, 1969).

The Nixon Shock: The Ultimate Depegging

By the late 1960s, economic pressures were mounting. The United States faced growing trade deficits, inflation from Vietnam War spending, and foreign governments increasingly concerned about America’s ability to honor its gold commitments.

France, under President Charles de Gaulle, played a particularly significant role in this drama. Skeptical of American monetary hegemony and advised by economist Jacques Rueff, de Gaulle began systematically converting France’s dollar holdings into gold in 1965. As historian Francis J. Gavin documents in “Gold, Dollars, and Power: The Politics of International Monetary Relations, 1958-1971,” de Gaulle not only withdrew gold from American reserves but publicly criticized the “exorbitant privilege” that the dollar-based system afforded the United States (Gavin, 2004).

This French challenge to dollar supremacy triggered what economic historian Benjamin J. Cohen called “a run on the bank” at a global scale, with other nations following France’s example (Cohen, 2001). As American gold reserves dwindled from $25 billion at the end of World War II to just $10 billion by 1971, and confidence waned, President Richard Nixon made a momentous decision.

On August 15, 1971, in what became known as the “Nixon Shock,” the president announced the United States would suspend the dollar’s convertibility into gold. This unilateral action effectively ended the Bretton Woods system and launched the era of floating exchange rates. As William Greider dramatically chronicles in “Secrets of the Temple,” this was no mere technical adjustment but a fundamental reimagining of global finance (Greider, 1987).

Economic historian Harold James described the moment in his book “International Monetary Cooperation Since Bretton Woods” as “the end of an era.” The world’s primary reserve currency—the mighty dollar—was now unmoored from any tangible asset, floating freely on the tides of market confidence alone (James, 1996).

The Aftermath: A New Monetary Paradigm

The consequences were profound and far-reaching. Without the discipline imposed by gold convertibility, monetary policy entered uncharted territory. Central banks gained unprecedented freedom to expand money supply, while governments discovered newfound fiscal flexibility. The dollar became what economists call a “fiat currency”—its value derived not from intrinsic worth or convertibility but from government decree and public confidence.

Nobel Prize-winning economist Robert Mundell later reflected that this shift represented “the biggest change in the international monetary system since the nineteenth century” (Mundell, 2000). It wasn’t just a policy change—it was a philosophical transformation in how we conceptualize money itself.

The Modern Conundrum: Stablecoins and the Search for Stability

Fast forward to today’s digital economy, and we find ourselves in the midst of another monetary evolution with the emergence of cryptocurrencies and, specifically, stablecoins. These digital assets attempt to minimize volatility by pegging their value to established currencies—most commonly, the U.S. dollar.

Yet herein lies a profound irony: stablecoins pegged to the dollar are ultimately anchored to a currency that itself is unpegged to any tangible asset. They are, in essence, derivatives of a fiat system—stable only to the extent that the underlying reference currency maintains its own stability.

This creates what monetary theorist Perry Mehrling might call a “hierarchy of money”—where stablecoins derive their credibility from the dollar, which derives its credibility from the Federal Reserve’s management and the economic might of the United States (Mehrling, 2012).

Beyond the Dollar: A Multi-Asset Approach

Perhaps the time has come to reimagine pegging mechanisms altogether. Rather than anchoring stablecoins solely to the dollar—itself an unpegged currency—a more robust approach might involve pegging to a basket of multiple currencies and bonds.

This model, reminiscent of the International Monetary Fund’s Special Drawing Rights (SDRs), could provide greater stability by diversifying risk across multiple sovereign economies. A stablecoin pegged to a weighted combination of dollars, euros, yen, and high-grade government bonds would be insulated from the volatility or policy decisions of any single nation.

Economic historian Charles Kindleberger, author of “Manias, Panics, and Crashes,” often emphasized that monetary stability requires systems that can withstand the inevitable shocks of a dynamic global economy (Kindleberger, 1978). A multi-asset pegging mechanism would embody this principle, creating digital currencies with resilience built into their very design.

Conclusion: Learning from History’s Greatest Depegging

The abandonment of the gold standard in 1971 remains history’s most consequential depegging—a watershed moment that fundamentally altered our relationship with money. As we navigate the frontier of digital currencies, this historical lesson looms large: the foundations upon which we build monetary systems matter profoundly.

Current stablecoins, by pegging exclusively to the unpegged dollar, inherit both the strengths and vulnerabilities of the post-Bretton Woods monetary order. A more thoughtful approach would recognize that stability might better be achieved through diversification—pegging to multiple currencies and bonds rather than a single fiat reference point.

In this way, we might create digital assets that learn from, rather than merely replicate, the monetary arrangements of the past. The greatest depegging in history taught us that monetary systems evolve; perhaps the next evolution lies in rethinking what it means to be “stable” in an inherently unstable world.

References

Bordo, M. D., & Kydland, F. E. (1995). The gold standard as a rule: An essay in exploration. Explorations in Economic History, 32(4), 423-464.

Cohen, B. J. (2001). Bretton Woods System. In R. J. B. Jones (Ed.), Routledge Encyclopedia of International Political Economy. Routledge.

Eichengreen, B. (1992). Golden Fetters: The Gold Standard and the Great Depression, 1919-1939. Oxford University Press.

Gavin, F. J. (2004). Gold, Dollars, and Power: The Politics of International Monetary Relations, 1958-1971. The University of North Carolina Press.

Greider, W. (1987). Secrets of the Temple: How the Federal Reserve Runs the Country. Simon & Schuster.

Hirsch, F. (1969). Money International. Allen Lane.

James, H. (1996). International Monetary Cooperation Since Bretton Woods. Oxford University Press.

Kindleberger, C. P. (1978). Manias, Panics, and Crashes: A History of Financial Crises. Basic Books.

Mehrling, P. (2012). The Inherent Hierarchy of Money. Social Fairness and Economics: Economic Essays in the Spirit of Duncan Foley, 169, 394.

Mundell, R. A. (2000). A reconsideration of the twentieth century. American Economic Review, 90(3), 327-340.

Stablecoin Evolution: Emerging Use Cases, Market Structure, and Regulatory Landscape

Posted on April 8, 2025June 18, 2026 by stg3

Key Insights from the RWA London Summit 2025

A recent panel discussion at the RWA London Summit in February 2025 featured experts from across the digital assets industry providing valuable insights into the evolving stablecoin landscape. The panel, titled “Stablecoins: Building the Bridge to Traditional Finance,” was moderated by Mike Manning, former Head of Blockchain & Digital Currencies at Amazon who worked on the digital euro project. Panelists included Dovile Silenskyte (Director of Digital Assets Research at WisdomTree), Jannah Patchay (Founder and Director of Markets Evolution), Lux Thiagarajah (Director of Growth at OpenPayd), and Jude Fredrick (Director of Business Development at Cryptochill by DeusX).

Emerging Use Cases

The panel highlighted a significant shift in stablecoin usage patterns over the past 18-24 months. While crypto trading remains the dominant use case (accounting for 91% of usage according to Ripple’s research cited by Silenskyte), cross-border payments are emerging as a compelling application driving stablecoin adoption.

This shift coincides with a notable decoupling of stablecoin usage from cryptocurrency prices. Historically, stablecoin activity correlated strongly with Bitcoin and Ethereum price movements. However, as Lux Thiagarajah, Director of Growth at OpenPayd, pointed out, around 18 months ago, this pattern began to change, with stablecoin usage continuing to grow regardless of cryptocurrency market conditions.

A key catalyst for this transition was the collapse of crypto-friendly banks like Silvergate and Signature, which drove businesses to seek alternative dollar-based settlement rails. Thiagarajah emphasized that payment processors now need to be “rail agnostic,” incorporating not just traditional systems like SWIFT, SEPA, and FPS, but also blockchain networks like Tron and ERC-20.

The cross-border payment use case is particularly compelling for several reasons:

Greater transparency
Faster settlement
Lower costs
Simplified currency conversion

The panelists also highlighted two additional emerging use cases:

Yield generation: Thiagarajah noted that unlike traditional EMIs and payment processors that cannot offer interest on fiat balances, stablecoins provide opportunities for users to earn yield on their holdings, particularly for clients in sectors like CFDs who need offshore dollar banking.
On-chain settlement for tokenized real-world assets (RWAs): Jannah Patchay emphasized that as the tokenization of traditional assets grows, stablecoins are positioned as the primary digital settlement asset, particularly given the absence of widely available CBDCs and the closed-loop nature of tokenized deposits.

The Need for Non-USD Stablecoins

Lux Thiagarajah highlighted a striking disconnect in the stablecoin market: approximately 99% of stablecoins are USD-denominated, yet the dollar represents only:

85% of FX transactions
40% of SWIFT transactions
60% of global FX reserves

This disparity highlights a significant opportunity for non-USD stablecoins, particularly in:

FX markets: Thiagarajah cited research from Warwick Business School demonstrating that EUR/USDC trading on Uniswap consistently remained within 20 basis points of traditional EUR/USD forex rates. This level of efficiency could dramatically reduce costs for companies conducting cross-border transactions.
Regional trade development: Jannah Patchay noted that current correspondent banking routes often follow colonial-era paths, creating inefficient payment flows. She provided an example where a payment from Kenya to Senegal might route through London, New York, and Paris before reaching its destination, adding costs and delays. Patchay argued that non-USD stablecoins could facilitate more direct regional trade and payment networks, particularly in Africa and Asia.

The emergence of on-chain FX settlement was highlighted as a potential catalyst for non-USD stablecoin adoption, with platforms like Cumberland and Zodiac Markets already demonstrating T+0 settlement for transactions between different stablecoins.

Stablecoins vs. Tokenized Treasury Funds

The panel addressed the blurring lines between payment stablecoins and yield-bearing financial products like tokenized money market funds. Patchay emphasized that while both maintain a stable value, they serve fundamentally different purposes:

Payment stablecoins are designed primarily for transactions and value transfer
Tokenized money market funds and similar products are intended for investment and collateral

Dovile Silenskyte from WisdomTree described their U.S. tokenized funds (including one yielding over 4%) that allow investors to earn returns while maintaining immediate liquidity for payments. However, most panelists, including Patchay and Thiagarajah, agreed that these products would likely remain distinct, with different pricing mechanisms and regulatory treatments.

Thiagarajah highlighted how tokenized funds could have provided a solution during the UK’s 2022 gilt market crisis under Liz Truss, allowing pension funds to use tokenized assets as collateral rather than selling underlying assets, potentially preventing the market disruption that eventually required Bank of England intervention.

Market Structure and Competition

The current stablecoin market is dominated by Tether and Circle (USDC), which together control over 85% of the market. Panel members had differing views on whether this duopoly would persist:

Jude Fredrick saw significant profit opportunities attracting new entrants, especially with what he perceived as a more crypto-friendly U.S. administration
Lux Thiagarajah believed the leaders would maintain their positions while expanding in different directions:
- Tether continuing to serve higher-risk jurisdictions and “banking the unbanked”
- Circle focusing on traditional finance institutions, particularly following its acquisition of Hashnote

Thiagarajah also mentioned Ripple’s RL USD as a potential emerging competitor due to the company’s established payment networks and banking relationships.

Tether’s announcement of Lightning Network integration to improve speed and reduce transaction costs was discussed by Fredrick, who saw it as opening opportunities for new market entrants. However, Thiagarajah questioned whether traditional financial institutions would adopt Tether despite these improvements, given regulatory considerations.

Silenskyte also noted an emerging stablecoin innovation generating high returns through basis trading (going long on Bitcoin while shorting futures), though Jannah Patchay cautioned this was more accurately categorized as a financial derivative rather than a stablecoin.

Regulatory Considerations

While the panel didn’t have time to fully explore the regulatory landscape, Jannah Patchay emphasized the importance of clear terminology and categories. She noted that the term “stablecoin” has become an unhelpful umbrella covering diverse products with different risk profiles and use cases. Patchay explained that regulators increasingly distinguish between:

Payment stablecoins intended for transactions
Tokenized money market funds regulated as securities
Other tokenized assets with their own regulatory frameworks

Fredrick alluded to the repeal of SAB 121 (Staff Accounting Bulletin) as a regulatory change that could allow large traditional financial institutions like JP Morgan and Visa to enter the stablecoin space. The regulatory clarity (or lack thereof) was recognized by all panelists as a significant factor in institutional adoption and market evolution.

Recent Developments

Since this panel discussion, several notable developments have occurred in the stablecoin space:

PayPal’s stablecoin expansion: PayPal’s PYUSD has gained significant traction and expanded its blockchain support beyond Ethereum to include Solana, enhancing its utility for cross-border payments and Web3 applications.
Regulatory progress: The EU’s Markets in Crypto-Assets (MiCA) regulation has begun implementation, providing clarity for stablecoin issuers in Europe, while the U.S. continues to work through a patchwork approach at both federal and state levels.
CBDC momentum: Several central banks have accelerated their CBDC development efforts, potentially creating future competition (or complementary infrastructure) for private stablecoins.
Increased institutional adoption: Major financial institutions like JPMorgan, BNY Mellon, and Franklin Templeton have increased their engagement with stablecoin technology, particularly for settlement and tokenized asset applications.

These developments reinforce the panel’s observations about the evolving use cases and market structure of stablecoins, positioning them as an increasingly important component of both traditional and digital financial infrastructure.

This article summarizes the “Stablecoins: Building the Bridge to Traditional Finance” panel at the RWA London Summit 2025, which brought together 200 senior executives from institutions including Fidelity, State Street, and LSEG to explore the future of tokenized real-world assets.

The Evolution of Crypto Credit Markets: Insights from RWA London Summit

Posted on March 29, 2025June 18, 2026 by stg3

The Surprising Face of Crypto Debt Markets

The most surprising revelation from the RWA London Summit 2025 wasn’t about technological innovation or regulatory developments – it was learning that the first institutional crypto loan occurred back in 2015 when a trading firm borrowed 3,000 Bitcoin (worth roughly $500,000-$1,000,000 at the time) from venture capitalist Tim Draper. By the peak of the 2017 market, that same loan had ballooned to approximately $60 million in value.

This historical anecdote, shared by Max Boonen, founder of B2C2 and PV01, during his fireside chat with Mark Jones, Head of Funding at B2C2, illuminated just how far the crypto credit markets have evolved in a relatively short time – from informal arrangements to sophisticated tokenized debt instruments.

The Past, Present, and Future of Crypto Credit

The “Case Study: Tokenization of Corporate Bonds” panel at the RWA London Summit provided a comprehensive journey through the evolution of crypto credit markets, offering valuable insights for financial institutions exploring this rapidly maturing space.

Origins (2015-2019): Necessity Drives Innovation

Boonen, who began his career as an interest rates trader at Goldman Sachs before founding B2C2 in 2014-2015, explained that crypto funding markets emerged from a practical need – market makers required borrowed Bitcoin to maintain trading inventory without exposure to price fluctuations.

“B2C2 was the first company to do that professionally,” Boonen noted. This early market was later dominated by Genesis Trading, which pivoted from OTC trading to lending as margins compressed. Their book size grew to approximately $20-25 billion at its peak, with a mixture of secured and unsecured lending – a model that ultimately contributed to their downfall during the Three Arrows Capital crisis.

Market Evolution (2020-Present): Risk Management Takes Center Stage

Jones described two distinct phases in the market’s recent evolution:

Pre-Three Arrows Collapse (2020-2022)

Excess liquidity and significant unsecured lending
The infamous “Grayscale arbitrage” trade that contributed to Three Arrows’ downfall
A domino effect of failures including Voyager, BlockFi, Celsius, and eventually Genesis

Post-Collapse Market (2022-Present)

Heightened focus on credit risk assessment
More robust SPV structures and rigorous credit analysis
Improved capital efficiency through “one-stop shops” and agency lending
The critical emergence of transferable tokenized credit instruments

Benefits of Debt Tokenization

The panel highlighted several key advantages that tokenized debt instruments offer over traditional bilateral lending arrangements:

1. Transferability

Traditional crypto loans are bilateral and non-transferable, restricting liquidity and secondary market development. Tokenized debt instruments, like the corporate bond issued via PV01, are fully transferable, creating new market opportunities.

2. Reduced Cyclicality

Boonen emphasized how tokenization dampens market cyclicality: “The inclusion in the menu of investments that you can make with your crypto is quite important in damping that cyclicality.” When crypto prices rise, funding demand typically increases as investors seek leverage. When prices fall, demand decreases. This creates volatile yield environments that can range from 7% to 12% within weeks.

By enabling crypto holders to access traditional asset yields and allowing traditional investors to lend against crypto collateral, tokenization creates more stable market conditions.

3. Enhanced Market Access

Tokenization provides two important capital flows:

Traditional investors entering crypto to lend against crypto collateral
Crypto holders using assets to access traditional investments without selling

4. Institutional Adoption Catalysts

For traditional asset managers with mandates restricting direct lending, security tokenization presents a compliant alternative. The panelists observed two types of new market entrants:

Established crypto funds developing dedicated credit mandates
Traditional asset managers allocating portions to crypto through tokenized instruments

The Road Ahead

Despite rapid progress, the panel emphasized that tokenized credit markets remain in early stages. Jones highlighted that approximately 80% of current RWA tokenization involves private credit, particularly home equity lines of credit – representing just 3% of the total U.S. housing debt market, suggesting significant room for growth.

The discussion underscored several key trends for the future:

Transferable tokenized credit instruments gaining traction
Institutional appetite varying with market conditions
Integration between traditional and crypto markets reducing volatility
Significant untapped potential in the broader credit market

Conclusion

The “Case Study: Tokenization of Corporate Bonds” session at RWA London Summit 2025 provided a rare window into the evolution of crypto credit markets from industry pioneers who helped build them.

As tokenization technology matures, the boundary between crypto-native and traditional finance continues to blur, with innovation focused on creating more efficient, accessible, and transferable credit instruments.

For financial institutions exploring this space, the key takeaway is clear: tokenized debt instruments represent not just a technological innovation, but a fundamental shift in how credit markets function – one that addresses longstanding inefficiencies while opening new opportunities for both traditional and crypto-native participants.

This article summarizes the “Case Study: Tokenization of Corporate Bonds” panel featuring Max Boonen (Founder, B2C2 & PV01) and Mark Jones (Head of Funding, B2C2) at the RWA London Summit 2025, which brought together 200 senior executives from institutions including Fidelity, State Street, and LSEG to explore the future of tokenized real-world assets.