RWA Musings: Investor Strategy, Compliance, Niche Segments, and Outlook
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RWA Musings: Investor Strategy, Compliance, Niche Segments, and Outlook
Conduct an in-depth exploration of RWA from perspectives such as compliance, niche sectors, and future outlook.
Navigating Web3 tides with focused insightsHost: Colin, Researcher at Mint Ventures
Guest: Teacher Mindao, Founder of dForce
Recording Date: 2023.7.10
Hello everyone, welcome to WEB3 Mint To Be, initiated by Mint Ventures. Here, we continuously question and deeply reflect, striving to clarify facts, understand realities, and seek consensus in the WEB3 world. I'm Colin, a researcher at Mint Ventures. Today, we're honored to have Teacher Mindao join us to discuss one of the hottest topics in the crypto space—RWA—from angles such as compliance,细分赛道, and future outlook.
Disclaimer: The views discussed in this podcast do not represent those of the guests' affiliated institutions, and any mentioned projects should not be taken as investment advice.
Difference Between RWA and STO Narratives
Colin:
The first question is, we can see that the narrative around the RWA market has recently gained increasing attention. Why do you think the market is noticing the RWA narrative at this particular time, and how does today’s RWA differ from the STO narratives of a few years ago?
Mindao:
It's been over a year since the last bull market turned bearish. We know that historically, the returns in DeFi or crypto mainly came from trading, leverage, and launching new tokens. After the DeFi Summer, from late 2020 to the peak in 2021, it was all about the proliferation of governance tokens. Yields were extremely high—DeFi APYs reached 20%, even 100% or more, with many dog-token mining schemes offering over 1000%.
Back then, U.S. Treasuries hadn't entered their rate-hiking cycle and offered near-zero yields, so people didn’t pay much attention to asset classes outside crypto. But now, as the crypto market turns bearish, the dollar enters a rate-hiking cycle, creating an inversion. If DeFi had a risk-free rate—say, the APY on Curve pools or lending platforms like Compound—it would now be around 0.5%, less than 1%, excluding subsidized yields.
In contrast, U.S. Treasury yields are now at 5.5% and could remain elevated for some time. This inversion means that capital might as well leave DeFi and return to the dollar world to buy government bonds. After all, DeFi carries multiple layers of risk—smart contract, asset, and counterparty risks—whereas Treasuries are comparatively safer. What makes the current RWA narrative different is that it’s tangible.
Besides this yield inversion, RWA assets—especially tokenized U.S. Treasuries—have grown from nearly zero last year to about $1.5 billion today. MakerDAO has also shifted a large portion of its stablecoin reserves into Treasuries.
STOs during the previous cycle, around 2017–2018, emerged before DeFi existed. They were mostly conceptual, focusing on equity-like assets such as company stocks, with little involvement in fixed-income instruments. But today’s RWA discussions center on U.S. Treasuries and other fixed-income assets. So, these are two different eras with vastly different narratives and contexts.
Colin:
I think another point is that many current investors or users hold substantial amounts of USD-pegged assets like USDT and USDC, whose primary investment need is low-risk wealth management. But back in 2017–2018, most projects were funded with BTC or ETH, so the user base has changed significantly.
Mindao:
That’s absolutely right. The overall market structure has changed dramatically. I remember in early 2020, stablecoins totaled about $1 billion. At the peak of DeFi Summer, they reached nearly $200 billion—a very steep growth curve.
But during the STO era, there were no such things; people played with native tokens on-chain, without stablecoins. From the last bull market to today’s bear market, the minted supply of stablecoins has declined but still stands at around $130 billion on-chain. Of that, less than 10% is actively earning yield. This represents a massive opportunity—nearly $120 billion in stablecoins sitting idle, generating zero returns.
This pool of capital has a huge demand for yield. Imagine if these funds could earn Treasury-level returns—say 4–5%. That would generate $50–60 billion in annual income, which currently flows entirely to Circle (USDC) and Tether (USDT), who collectively earn about $40–50 billion per year.
This is why RWA is so hot now—because there's a clear, urgent demand. It's unrelated to crypto cycles; it's about capturing the risk-free yield of U.S. Treasuries. The pressure from interest rate spreads between dollars and RMB is evident too—many RMB holders are converting up to $50,000 into dollars and depositing them at higher rates. This prompted the PBOC to intervene, instructing state-owned banks to cap deposit yields.
This shows that demand for dollars and U.S. Treasuries is enormous in traditional finance. In crypto terms, having over $100 billion in non-yielding stablecoins is highly attractive to Treasury issuers. At the same time, it’s beneficial for the crypto ecosystem—we’ve always worried about capital outflows, but with interest-bearing markets, it’s like having yield in Alipay’s Yu’E Bao, keeping funds on-chain. That’s why RWA, especially Treasury-based tokens, has gained so much traction recently.
Colin:
Yes, data shows that previously, growth in dollar stablecoins—especially fiat-backed ones—came largely from traditional finance players arbitraging into crypto. Now, with a significant interest rate inversion, some may want to arbitrage the other way. If we can bring dollar yields on-chain, these users may stay, reducing liquidity pressure on the entire market.
Mindao:
Exactly. I find this phenomenon particularly interesting. When discussing RWA, many in crypto—including native participants—view it as betraying the revolution. But I don’t see it that way. Simply put, if $100+ billion in stablecoins sit idle and eventually flee, enriching traditional banks instead, wouldn’t it be better to keep that capital in crypto and democratize yield distribution on-chain? That’s a profoundly crypto-native idea.
Most non-U.S. dollar holders globally cannot access U.S. Treasury yields yet bear the burden of dollar inflation—that’s deeply unfair. If Treasuries can be tokenized and democratized—via DeFi bringing yield onto crypto chains, or through T-Bill tokens—then non-American dollar holders can finally earn yield while enduring dollar inflation. This fairness is crucial.
Colin:
Yes. A few years ago, the U.S. base rate was around 0.25%, almost zero. Now it’s 5.5%. If you’re not offering yield, the opportunity cost for users is simply too high.
Mindao:
Exactly. And importantly, dollar stablecoins themselves can be seen as massive RWAs. Now adding Treasuries creates a complete twin system—effectively moving both dollar-denominated assets and their yields fully on-chain. This is a major milestone for crypto infrastructure. It will also drive numerous traditional financial applications, like composable fixed-income products on-chain whose yield sources aren’t tied to crypto cycles. These products can be combined in various ways, expanding crypto’s application ecosystem.
Key Success Factors for U.S. Treasury RWA Projects
Colin:
Earlier, you mentioned that the core of the current RWA narrative revolves around U.S. Treasuries. What do you think are the key factors for success for Treasury-based RWA projects?
Mindao:
We’ve seen several fast-moving projects in the market, including Ondo Finance, Asia’s Matrixdock, and Open Eden, all focused primarily on Treasuries.
I see a few critical points here.
First, compliance—whether the structure truly achieves bankruptcy remoteness. Over the past year+, most so-called compliant CeFi entities collapsed, so trust in CeFi is arguably negative now—even large groups like DCG faced insolvency.
Another key aspect is that Treasury RWA issuers face competition from DeFi projects, even though they may collaborate—for example, asset issuers might want DeFi protocols to use their tokens as collateral or reserve assets. But in some ways, there’s inherent competition.
For instance, MakerDAO didn’t go through these platforms. Its RWA strategy relies on its own trust and legal structures to tokenize assets. However, these tokenized assets don’t circulate publicly—they’re purely off-chain: convert stablecoins to USD, then buy Treasuries via on-chain + trust structures, reflecting yield back to Dai holders. So MakerDAO isn’t cooperating with existing platforms.
MakerDAO is now the largest holder of RWA assets and competes indirectly with DeFi projects. For DeFi teams, the key challenge is how to distribute yield via tokenization.
Current RWA issuers face several challenges.
First, all asset issuance requires KYC—whether trading or buying T-Bill assets. This mirrors the stablecoin issuance model.
Everyone knows that to mint or redeem USDC or USDT, you must undergo KYC—it’s a basic requirement. But once in secondary circulation, that requirement disappears.
RWA assets are stricter—even in secondary markets, whitelisting is required. For example, Matrixdock’s T-Bill token has a pool on Curve matched with stablecoins, but only whitelisted accounts can trade within that pool.
This significantly limits the scalability of T-Bill token issuers.
But DeFi projects have various ways to work around this. For example, Ondo Finance launched Flux Finance, using a pool model where Ondo’s T-Bill tokens serve as underlying collateral. Market makers—or the project itself—manage the collateral, preventing散户from directly handling it.
Yet users can borrow stablecoins from Flux Finance against that collateral, convert to USD, and buy more Treasuries, creating a loop. This way, T-Bill yield is indirectly passed to stablecoin depositors via lending. The advantage? Deposit users don’t need KYC—they aren’t holding or purchasing T-Bills directly, just lending to market makers who do the rest. I think this is a clever structure.
Similarly, MakerDAO doesn’t expose Dai holders directly to T-Bill tokens. Instead, it uses a Trust to hold the tokens and maps the yield via monetary policy.
It’s even more isolated than Ondo—there’s no direct link. Just because Maker earns 5% on Treasuries doesn’t mean it must pass 100% to Dai holders. It might allocate only 3.5% to its monetary policy rate, independent of the Treasury yield structurally. That’s another smart design.
To answer your original question—how can RWA issuers capture large markets? It’s hard to say. As I mentioned, if DeFi projects grow large enough, they might bypass issuers entirely, building their own structures. Or DeFi could become such a powerful distribution channel that the underlying KYC-compliant Treasury issuers end up in a weaker position.
Comparison Between KYC and No-KYC Models
Colin:
Your previous answer touched on two other key factors: KYC and architecture. Let’s start with KYC. Currently, one market model involves setting up a wallet where users upload documents like passports to receive an SBT—essentially a KYC token—enabling a lower-barrier KYC process. From a market practitioner’s perspective, do you think this model will gain traction in the future?
Mindao:
Yes, I’ve tweeted about this before, and some KOLs have noted that buying U.S. Treasuries isn’t simple—even for Americans. For non-Americans, it’s even harder, requiring extensive KYC and account setup, creating a very high barrier. Out of 100 people, maybe only one or two can cross it. Using SBT identity tokens, on-chain KYC, or exchange-based KYC for distribution still filters out many users.
It’s similar to Interactive Brokers (IB) offering 4.5% yield on USD accounts. But opening an IB account isn’t easy—lacking offshore USD accounts already excludes 99.9% of people. I believe that anyone active in crypto for a year or two likely already has KYC done on exchanges. So for this group, the hurdle isn’t big.
But if we consider users outside crypto, KYC becomes a major obstacle. For example, most Chinese citizens don’t have passports—how would they verify? That’s a real challenge.
Colin:
I see it as a compromise—possibly easier in developed countries with widespread passport adoption and ID systems, but problematic in developing nations.
Mindao:
But it has advantages for CeFi and centralized exchanges in distribution. Binance, for example, could offer compliant Treasury products to KYC-verified users. Although it’s under scrutiny now and hesitant, theoretically it’s feasible. What excites me most—not necessarily revolutionary—isn’t that centralized exchanges offer KYC-based trading services. That’s not the key.
The key insight is the long-overdue realization: dollars are already tokenized and widely used, but dollar-native yield hasn’t been tokenized—that’s a gap. A currency without intrinsic yield isn’t truly complete.
Thus, the most important implication of RWA is recognizing that dollars are tokenized—we must now figure out how to tokenize dollar yield. Combining both means fully tokenizing the dollar’s monetary system on-chain—an enormous leap. Naturally, this promotes dollar adoption. Imagine: if you hold dollars, stablecoins already offer superior liquidity compared to cash or bank deposits, creating a liquidity premium. Add yield, and capital and opportunity costs are compensated on-chain. Then why keep money in banks?
I think there’s no reason.
JPMorgan alone holds over $2 trillion in zero-interest deposits, all invested in Treasuries. But for ordinary people, the entry barrier is too high.
As I said, buying Treasuries is difficult—especially for non-Americans holding dollar assets. How do overseas holders buy U.S. Treasuries?
It’s a high barrier. But if we tokenize U.S. Treasuries on-chain, stablecoin holders can directly access Treasury yields. For crypto, this not only retains $130 billion in capital but also attracts M1 funds from traditional finance.
That scale and impact are far greater. Across past cycles, we feared capital flight and wanted to retain it. In fact, Treasuries are the best tool to keep dollar capital on-chain. As long as funds stay on-chain, users can access various DeFi products and crypto services, creating a virtuous cycle. With on-chain Treasuries, I believe retention will be far better than in previous cycles.
Colin:
Many leave during bear markets to chase higher yields in traditional finance. With on-chain yield available, they’d have less incentive to exit.
Mindao:
Exactly. I believe Treasury RWA is just the beginning. Beyond Treasuries, there are other bonds. Fixed-income assets are crucial for money markets. If we can bring most attractive, high-quality bonds from traditional finance on-chain, it will organically grow crypto capital retention and unlock new applications—driven not by crypto cycles, but marking a paradigm shift.
Colin:
Yes, it could trigger a deposit migration between traditional finance and crypto markets.
Mindao:
Yes, at least for these users, the rationale for converting stablecoins to USD and depositing in banks diminishes. Among my circle, some cash out into stablecoins, but few bother depositing in banks. With on-chain Treasury yields, they’re more likely to stay on-chain due to greater composability and opportunities.
Colin:
Yes. You mentioned another model—no KYC—where yield is layered and mapped upward. Some projects let users lend funds to an institution acting as intermediary, isolating KYC. Compared to direct ownership models, do you favor no-KYC approaches?
Mindao:
The key lies in the legal structure holding the underlying assets. For Dai, USDC serves as backing—we must examine how USDC’s dollar reserves are custodied. With Treasuries, it’s fundamentally the same issue as stablecoins.
Centralized issuers face structural and compliance risks—whether KYC or no-KYC, these ultimately manifest on-chain as aggregated underlying risks. So if T-Bill assets can be issued compliantly like USDC, no-KYC versions could be seen as DeFi experiments. Current KYC and no-KYC models resemble front store and back factory: the factory (KYC layer) produces T-Bill assets, requiring KYC.
Without KYC, compliance, fund inflow/outflow anchoring, and liquidity become hard to guarantee. Thus, the factory needs centralized, compliant institutions. On the stablecoin side, Circle handles KYC for all mint/redeem users and ensures structural compliance. Personally, I think the front store should adopt DeFi’s permissionless, no-KYC approach.
Two models stand out: one using lending pools, the other mimicking MakerDAO’s monetary policy mapping.
Others use rebase tokens, like stETH-based rebase tokens. But I think rebase tokens tightly coupled to T-Bill yields carry compliance risks. Ideally, roles should be divided: factory and store each have responsibilities.
A few strong centralized institutions may excel in T-Bill issuance, while others distribute Treasury yields via DeFi frontends.
Colin:
This might impose higher regulatory demands on semi-centralized intermediaries—the “semi-centralized” referring to DeFi protocols forming pools where users lend without KYC to an entity handling backend operations—essentially the front-store-back-factory model.
Mindao: For on-chain protocols, depositing stablecoins into a pool and borrowing against collateral remains essentially a lending relationship. Jurisdictions may interpret this differently.
If run in the U.S., regulators might argue the intent is to access underlying Treasury assets, making the interest paid a security token—this is debatable. But I believe many innovative, programmable structures are possible on-chain.
For example, when Gemini and DCG had legal issues risking bankruptcy, MakerDAO removed and replaced them. Later, after USDC depegged, its allocation was reduced. Precisely because on-chain elements are programmable, decentralized stablecoin projects gain a huge edge: if a component poses excessive legal or compliance risk, it can be gradually phased out.
MakerDAO’s Treasury Allocation and Risk of Regulatory Seizure
Colin:
You mentioned the important case of MakerDAO. What’s your view on MakerDAO allocating Treasury assets? Is there a significant chance regulators could seize such assets? Under what circumstances might seizure occur?
Mindao:
I believe MakerDAO’s RWA framework has existed for at least five years.
Initially, its RWA strategy didn’t focus on Treasuries but on solar energy and real estate. Early projects included property and solar farms. Since Rune is an environmentalist, he hoped to turn MakerDAO into a green fund with solar as core collateral.
But this proposal met skepticism in the community. Practically, it faced major issues. Anyone experienced in infrastructure investing knows solar farms struggle with scalability due to high operational and counterparty risks.
Operating a solar farm in China exposes you to Chinese regulatory risks. Over the past decade, China’s solar policies—subsidies, loans—have frequently changed. Such volatility makes it unsuitable for large-scale assets.
MakerDAO took many detours, partnering with Centrifuge to invest heavily in real estate and solar. But these never scaled beyond tens of millions due to community concerns over unscalability and default risks.
As U.S. Treasury yields rose, MakerDAO realized Treasuries were ideal. Its current RWA strategy evolved naturally rather than being a sudden pivot. Now, I see several strengths for MakerDAO or other stablecoin projects adopting Treasuries.
First, a stablecoin is itself a dollar-denominated debt instrument—Dai is a debt. The highest-quality dollar debt is U.S. Treasury bonds. If you don’t trust Treasuries, nothing else is trustworthy. That’s fundamental. If you distrust Treasuries, why trust solar farm debt? Or real estate developer debt? Let alone anything else.
When people debate RWA, they often miss this point—arguing we should innovate in crypto, not return to TradFi. But my view is: if you’re building a decentralized dollar stablecoin, you can’t avoid Treasuries. Logically, it’s unavoidable. Treasuries are the foundational source of risk-free yield for all dollar assets.
If you’re issuing stablecoins pegged to ETH or BTC, that’s different. But if you’re issuing a dollar stablecoin without allocating to risk-free Treasury yield, your logic is inconsistent. A key reason MakerDAO shifted heavily into Treasuries is that most new Dai is minted via the PSM (Primary Stablecoin Module), where ~70% is backed by USDC. Holding USDC without yield while bearing identical risk made no sense—especially after USDC’s depegging incident served as a wake-up call.
In reality, you’re not exposed to Fed or dollar risk, but to Circle’s operational risk—yet Circle offers no risk premium. So MakerDAO converted USDC to Treasuries. Regulatory risk is similar: if regulators seize Treasuries held in MakerDAO’s trust, it’s akin to seizing USDC’s underlying cash reserves.
But for MakerDAO, the benefit is yield. With yield, accepting equivalent risk makes sense. Actually, I believe establishing a trust to hold Treasuries reduces operational risk versus indirect exposure via Circle. Circle, as a company, has broader operational risks—we don’t know what else it does. But a clean trust holding only Treasuries? That risk is relatively small. Why do regulators scrutinize Circle or Binance?
Because they’re not just custodians—they run trading, derivatives, lending, and face complex AML issues. With proprietary trading desks, concerns arise about whether they trade against clients.
Circle faces suspicion too—Tether self-lends and even holds commercial paper from Chinese property developers. You realize that holding USDT or USDC actually exposes decentralized projects to greater risk. Better to set up a clean trust solely for Treasuries. The risks you mentioned—if they don’t act, they face equal or greater risk. I believe MakerDAO’s use of a trust with bankruptcy remoteness, merely holding Treasuries for the DAO without retail interaction, actually lowers regulatory risk.
Colin:
Moreover, they achieve daily disclosure of asset holdings—something USDT and USDC can’t currently do.
Mindao:
Yes, honestly, there’s another point people may overlook. If MakerDAO holds $4 billion in USDC and converts $3.5 billion to Treasuries, in a way, Dai’s creditworthiness improves.
This move is effectively shorting USDC—when USDC depegs, Dai benefits. If I convert all USDC to Treasuries and USDC collapses, I gain. So stablecoin issuers buying Treasuries are essentially shorting or hedging USDT/USDC risk.
Suppose MakerDAO reduces on-chain USD reserves to just $100–200 million—enough for redemption and liquidity—while converting the rest to Treasuries. Their risk profile might then be lower than USDC/USDT. That’s my view. Interestingly, this turns decentralized stablecoin mechanics directly into Federal Reserve equivalents—cutting out intermediaries.
Previously, fiat-backed stablecoins were seen as more stable and lower risk than decentralized ones. But if most reserves shift to Treasuries, the opposite may be true—decentralized stablecoins could become safer than centralized ones.
Colin:
You mentioned earlier that Circle and Tether add two extra layers of risk—operational risk and counterparty risk from their asset allocations—yet these aren’t priced into the assets.
Mindao:
Yes, beyond that, there are high operational risks in token management, cross-chain minting/burning, etc. Also, USDC and USDT face global regulatory risks—not limited to one country.
MakerDAO’s trust might be based in the U.S. or an offshore jurisdiction—exposed to fewer regulatory jurisdictions. But USDC and USDT face scrutiny from up to 20 governments. The Chinese government could freeze assets if they know which Chinese bank holds them—potentially enforced via Hong Kong.
Why don’t Circle and Tether bank in Hong Kong? Because of foreign regulatory seizure risks. Stablecoin operators serve vast user bases—unlike MakerDAO’s Dai, which isolates users at the contract layer. The asset is just a DAO, avoiding exposure to diverse users. But USDC and USDT serve hundreds of thousands—even millions—of retail, corporate, and hacker users, facing vastly broader regulatory exposure.
Colin:
So you believe that once Treasury RWA comes on-chain, it could significantly reshape the stablecoin landscape—is that accurate?
Mindao:
I believe that in the past, decentralized stablecoins faced a problem: during DeFi Summer, various token models and Ponzi dynamics led to rampant speculation. But I think Treasuries can strongly empower decentralized stablecoins. How?
Previously, I thought decentralized stablecoins couldn’t compete with fiat-backed ones due to the latter’s superior on/off-ramp advantages and compliance. Plus, higher slippage friction made competition tough. But now, if DeFi decentralized stablecoins incorporate Treasury yields, they may surpass centralized stablecoins in appeal—offering better yield, programmability, flexible risk adjustment of underlying assets, and crucially, reduced issuer risk. So decentralized stablecoins now have a chance to leapfrog ahead.
Colin:
Meaning: issuing new decentralized stablecoins backed by Treasury RWA, using a DAO structure interfaced with external legal frameworks. This approach reduces both asset and operational risks compared to Circle.
Mindao:
Yes, I think risks are much lower. Another key point: both Circle and USDT face competition not just from other stablecoin issuers but also from future national digital currencies.
The competitive landscape is unclear, and they rely on costly, extensive real-world infrastructure. DeFi projects, meanwhile, leverage existing fiat stablecoin on/off-ramps.
But I believe projects like MakerDAO—with their own Treasury accounts—are opening alternative on/off-ramps, potentially enabling direct dollar swaps. Not for retail, but through institutional trades, creating a DAO-native on/off-ramp that bypasses traditional stablecoin channels.
Colin:
So the next major narrative branch may be the transformation of decentralized stablecoins.
Mindao:
Yes, we’ve long debated “real yield” in crypto. I believe real yield means RWA—the most authentic yield. Real yield means no subsidies and infinite scalability.
DeFi has a problem: many yields can’t scale.
For example, you might earn 10% on $50M, but with $1B, the yield drops to zero. Treasuries don’t have this issue—their capacity and predictable rates differ fundamentally from corporate bonds. They embody true risk-free rates.
Promising RWA Assets and Their Risks
Colin:
Beyond Treasury-based RWA, which other types of RWA assets do you find promising? Do they carry new risks compared to Treasuries?
Mindao:
My view on RWA is that deployment follows standardization levels. Highly standardized, homogeneous assets come first—fungibility is part of standardization. Why did dollar stablecoins become the largest RWA? Because dollars are highly standardized and fungible—one dollar equals any other, interchangeable without difference.
Second, stablecoins can be centrally managed—issued and managed by one bank or issuer. They’re highly standardized. Similarly, T-Bills share these traits, though they’re viewed more as securities under regulation, whereas stablecoins are seen as currency.
Beyond Treasuries, I believe the next easiest step is other bonds—fixed-income products. Their risk-return profiles are relatively standardized, with established pricing across ratings. Equities are different—valuation varies widely, with diverse models lacking consensus. So I expect RWA’s next phase to include other bonds, like Tier 1 capital bonds from banks such as HSBC. While not quasi-sovereign, they’re solid liabilities—especially from U.S. systemically important banks—and offer yields distinct from Treasuries. Then possibly bonds from other financial institutions, followed by corporates.
Stocks are awkward—traditional stock trading isn’t high-friction. Those wanting stocks can usually access them; others aren’t interested. So stock-like assets may not gain traction as quickly as bonds.
Past attempts at stock tokenization—like Mirror’s synthetic Tesla or Apple shares—showed limited trading demand. FTX also issued stock tokens—high compliance risk, but demand wasn’t as high as expected.
Real estate feels more like fixed income, but it’s NFT-like—each property unique, with varying country risks. We once discussed turning real estate into REITs—standardized financial products—before tokenization, making it viable RWA.
I think real estate may deploy faster than stocks—huge scale, rental yields, closer to fixed income despite equity features. These are all solid RWA candidates. Another category we discussed last cycle is supply chain receivables—tokenizing supply chain finance.
Supply chain tokenization is a form of fixed-income asset—bundling receivables into tranches, each priced as fixed income. So, bond-like assets will likely see faster adoption than equities.
By standardization level and capital structure risk, I believe we’ll progress from low to high risk—equities, stocks—along this path. And fixed income plus real estate already totals hundreds of trillions. Full tokenization of these alone would be transformative.
Can RWA Boost Small DeFi Niches?
Colin:
Looking back at this year, comparing RWA and LSD, both aim to introduce new underlying assets to DeFi. With LSD, we saw niche areas like yield tokenization gain attention. From your view, if Treasury RWA becomes a major on-chain asset, could it spark growth in smaller DeFi sectors?
Mindao:
Absolutely. LSD and Treasury tokenization share a key similarity: both bring risk-free yields on-chain. You could say Treasury tokenization is “staked USD.” At their core, both are about porting different assets’ risk-free rates to-chain.
For example, the largest ETH LSD acts as crypto’s approximate risk-free rate—denominated in Ether, since many DeFi tokens are Ether-based, including LP pairs on Uniswap and Curve.
While Bitcoin once dominated base pairs, Ethereum functions more like native money. Its staking yield is akin to native currency’s risk-free rate. In traditional finance, most assets are priced atop risk-free rates.
Corporate bonds, bank loans, real estate—all priced above risk-free rates, forming layered asset valuations. Stock prices derive from bond funding costs. So risk-free rate is the foundation.
Now, many LP tokens use ETH LSD instead of native ETH. Products like Pendle—structured senior/junior tranches—have emerged. Similarly, bringing dollar risk-free rates on-chain could spawn countless new products.
Recently, we’ve considered replacing traditional stablecoins (USDT, USDC, USX) with sDai—earning Treasury RWA yield with high liquidity, no subsidies. Using sDai as a pair offers clear advantages.
In the future, we might replace all pairs with sDai or similar T-Bill-yield assets—even launch our own yield-bearing token for others to use. This represents a full liquidity upgrade in DeFi infrastructure—replacing non-yielding assets with yielding ones. This shift will be massive—akin to how traditional finance reacts to Fed rate changes, which ripple across all dollar-denominated assets.
Likewise, bringing dollar rates on-chain accelerates transmission—DeFi composability amplifies rate signals. That’s why dollar yield on-chain is great—just as LSD is great for Ethereum. It not only gains utility on-chain but can act as restaking collateral, securing other chains—expanding use cases.
Colin:
At the start of this year, I shared your view. I believed LSD yield represented Ether-denominated risk-free rate. Based on that, an Ether-bond market could emerge. Markets like Pendle have shown rising TVL trends. So I’m optimistic about Treasury RWA—its arrival could ignite explosive growth in new USD-denominated DeFi niches.
Mindao:
Yes. Going back to my earlier point: ironically, the ultimate beneficiaries of RWA may not be the RWA issuers themselves, but DeFi protocols like MakerDAO. Due to composability, DeFi players end up capturing the value.
RWA vs. LSD Comparison
Colin:
Next question: compared to LSD, the market focuses on top-tier issuers like Lido, Rocket Pool, Frax. In RWA, such issuers exist but capture less value—can we understand it that way?
Mindao:
There’s a specific issue with U.S. Treasury RWA issuers: KYC requirements limit network effects. Earlier, we noted Lido’s LSD succeeded by achieving broad circulation—its ERC20-like tradability built network effects through liquidity.
But RWA issuers rely on DeFi projects for distribution. Dai passes yield to Dai holders; USX passes it to USX holders. That yield becomes the distributor’s dowry. That’s a key difference between RWA issuers and projects like Lido.
Lido is essentially a DeFi project—tokenizing native on-chain yield and enabling fully permissionless circulation. Many compare them, but they’re fundamentally different. Think of current T-Bill issuers as Lido node operators. In the LSD space, node operators get the bones—protocol takes the meat.
Node operators work hard—security, maintenance—earn thin margins, split half with protocol, and generate network effects for the protocol. So yes, T-Bill RWA issuers are more like staking node operators.
Colin:
Yes, that clarifies it. Nodes interface off-chain, require hardware upkeep and other demands.
Mindao:
Yes, nodes also face准入and compliance requirements.
Regulatory Intervention Outlook
Colin:
We’ve discussed many issues—new on-chain risks, user pain points. Next: in recent years, we attracted more users. Now, with RWA gaining momentum, we hope to onboard more assets. As a practitioner, how do you view regulatory intervention?
Mindao:
I believe regulation is inevitable for any financial product. But the appeal of RWA is that it breaks from crypto’s
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