Income-Generating Physical Asset Tokenization Report: US Treasuries Drive Yield Rise, Surge in Demand from Native Encryption Users

There are various types of physical asset tokenization on the blockchain ( RWA ), each with its own characteristics, serving different use cases. While stablecoins and tokenized gold have existed for years, other types of RWA, such as U.S. Treasury bonds, have emerged recently against the backdrop of rising interest rates. This article will briefly outline several types of income-generating RWA:

• Real Estate
• Private Lending
• Government Bonds

Note: The following analysis focuses on RWA tokenization assets and their market value. This report does not include information about the underlying protocols for constructing RWA or the auxiliary blockchain native services that support RWA trading and financial management. Furthermore, the report will not involve stablecoins in charts and RWA TVL calculations to avoid overshadowing the rise of other smaller market cap RWAs or underestimating the driving forces behind RWA.

Integrating the Real World with the Digital World

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

• Acquire assets in the real world
• Tokenize these assets on the chain
• Distribute RWA Tokens to on-chain users

If there is no issuer, whether they are centralized companies, decentralized protocols, or a combination of both, RWA will not exist on the chain.

Notable 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 worth $310 million) - a traditional financial institution issuing tokenized treasury tokens.
• Wisdom Tree( actively issued RWA worth 11 million USD) - Institutional capital market for issuing treasury tracking funds.

This brief list highlights the situation of off-chain entities endorsing on-chain RWA. Franklin Templeton and WisdomTree are two seasoned traditional financial companies whose main businesses are not related to cryptocurrency and blockchain technology. Franklin Templeton is a global investment firm with a history of 76 years, providing mutual funds, ETFs, and other fund products for individuals and institutions. As a company, Franklin Templeton manages over 100 ETF and mutual fund products, with total assets under management of $1.5 trillion. WisdomTree is a global financial innovation company founded in 1985. The company offers a diversified range of exchange-traded products (ETP), models, and solutions. WisdomTree manages total assets of $95.948 billion.

In recent years, Franklin Templeton and WisdomTree have begun to explore RWA by tokenizing various traditional financial instruments such as tokenized equity funds and government bonds to meet the needs of institutional clients. Although this work is still in its early stages, the actions of traditional financial companies to issue RWA have the potential to catalyze a large number of new users who have never interacted with the blockchain to enter the cryptocurrency space.

Yield-generating RWA rise

As of September 30, the market value of RWA reached $2.49 billion, a decrease of 9.6% from the peak of $2.75 billion set on April 19. Despite strong growth in government bond-related RWA, the active loans from private credit issuers have significantly decreased over the past 18 months, resulting in the RWA market value falling below its historical high.

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

private credit

Private credit is a form of lending provided by non-bank institutions. Since the financial crisis of 2008, banks have faced increasing regulation, leading to significant growth in the private credit market as borrowers seek alternative sources of capital. This trend has further expanded in the current interest rate cycle, with bank balance sheets being particularly constrained. Private credit solutions benefit both borrowers and lenders. They provide borrowers with the flexibility that bank loans lack; their floating rates offer interest rate protection that fixed-rate alternatives do not. As of August 2023, the global private credit lending 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, a growth of 184% during the period. Most of the rise, 174%, came from a certain platform, which saw its outstanding loan balance increase by $155.7 million. A certain decentralized credit market experienced the largest relative change in the past three quarters. From January 1 to September 30, the loan balance on that platform grew by 966%, reaching $23.96 million by September 30. Throughout its lifecycle, the platform has issued over $400 million in private credit loans across three chains.

Although there was a rise in 2023, the total value of on-chain private credit loans is still 70% lower than the historical high of $1.54 billion reached in May 2022. While the Federal Reserve raised interest rates significantly, active loans decreased sharply, and the yield to maturity rose within 9 months after the first interest rate hike in March 2022.

The returns that users can obtain by depositing stablecoins for on-chain private credit loans are significantly higher than the returns users receive from certain DeFi lending protocols using stablecoins. From January 1 to September 30, the average daily interest rate spread between the on-chain private credit loan tokenization yields and the weighted average of the stablecoin supply rates from these protocols was 7.7%. The stablecoin deposit interest rates are calculated based on the weighted average of the borrowed amounts of the following assets on these protocols:

It is worth noting that depositing stablecoins into these decentralized lending protocols involves different risk profiles compared to depositing into those that offer tokenization of real-world private credit loans. Most loans on decentralized lending protocols are over-collateralized, while tokens for private credit loans may not be.

( real estate

Real estate is a tangible asset class that includes properties such as residential, commercial buildings, and land. Real estate is particularly attractive to investors because of its potential to generate positive cash flow through passive income streams like rent. In 2023, real estate is the largest asset class in the world, valued at approximately $613 trillion.

Among all the profitable RWA categories covered in this report, on-chain real estate has the least growth in USD terms. From January 1 to September 30, the total value of these tokenized assets was $178 million, representing fractional ownership of real estate in some cases. A certain token is the largest issuer of tokenized real estate, holding a 49% market share. A certain company is another RWA issuer focused on real estate, experiencing the strongest growth this year. The total value locked in the company's tokens increased from $100,000 to $64 million in the first three quarters of 2023.

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) government bonds and other bonds

U.S. Treasury bonds are debt securities guaranteed by the government. They are widely regarded as the safest and most reliable type of yield asset, known worldwide as "risk-free." In contrast, corporate bonds are debt securities issued by companies, with potentially higher yields but also greater risks than Treasury bonds. In 2022, the global bond market was valued at $133 trillion, and U.S. companies issued $1.02 trillion in corporate bonds in the first three quarters of 2023.

The value of tokenization of national bonds and other bonds rose by $557.05 million from January 1 to September 30. Three companies are the top three issuers of national bond RWA. They collectively issued $572.05 million in assets ###, accounting for 85% of the category of tokenized national bonds and other bonds (, and issued $468.5 million in national bond RWA this year.

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A certain company differs from other issuers in this category as it issues bonds related to sustainable infrastructure developers. These instruments are more like corporate bonds rather than government bonds RWA issued by other parties. The bonds issued by the company allow token holders to earn returns by providing funding for development and allow developers to issue debt to finance their initiatives.

Another tokenized treasury asset with a market value of approximately $1.8 billion is a certain Token. This asset is the first RWA project launched on a certain blockchain. Recently, this asset has faced criticism for its lack of transparency regarding its support and revenue sources.

In the past 18 months, the average yield of U.S. Treasury bonds with maturities of less than 3 years ( has been higher than the average yield of stablecoin deposits, which is the most widely adopted maturity on-chain ). In 2023, the average daily interest rate difference between these Treasury bonds and the weighted average rates of stablecoins from certain DeFi protocols is approximately 3% ( Treasury bond rate - on-chain rate ). In contrast, the average interest rate spread between Moody's AAA-rated corporate bonds and on-chain stablecoin yields is 2.7% ( corporate bond yield - on-chain rate ).

Prospect

The demand for returns from local users of cryptocurrency has driven the rise of on-chain RWA. This year, approximately 82% of the new value created in the RWA space comes from the tokenization of income-generating RWAs such as private credit, real estate, and government bonds. Compared to non-income-generating RWAs like gold, stocks, and carbon offsets, the share of income-generating RWAs has nearly doubled from 31% on January 1 to 53% on September 30, approaching the historical high of 57% by 4%.

From 2021 to 2023, the Federal Reserve's aggressive shift in monetary policy raised benchmark interest rates to levels not seen since 2007. This created new demand for RWA-native decentralized finance users seeking higher yields.

( Most RWA users are encryption native users.

The majority of on-chain RWA demand comes from a small number of encryption-native users, rather than new encryption adopters or traditional investors. The average user address interacting with RWA Tokens was created before these assets were created on-chain, highlighting that the average RWA holder has been trading on-chain for some time.

As of August 31, 2023, there are a total of 3,232 unique addresses holding RWA assets issued by the aforementioned companies and protocols. The average age of addresses holding and interacting with RWA is 882 days, or 2.42 years. This means the average address has been on-chain since April 2021. In contrast, the average age of RWA assets is 375 days. For tokenized treasury assets, the age of these RWAs is calculated as the number of days from the first token minting date to August 31, 2023. For the age of assets issued by certain private credit platforms, it is calculated based on the number of days from the protocol launch date to August 31, 2023. For private credit RWA assets, using the protocol launch as the starting date for the age of these assets can compensate for the rolling nature of on-chain private credit ), that is, loan maturity/pool closure, new loans opening (.

20% of the addresses interacting with or holding the above RWA have started on-chain transactions in 2023, as well as more than three years before the rise of RWA assets on the chain.

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Many of the above emphasized were executed less than a year ago.