Liquidity in exchange for income, understand the RWA path in one article

The world is in a hot and cold situation. Everyone on and off the chain is pursuing liquidity. Looking east, the stock market is robbing banks of financial management. Looking west, major AI companies are looking for money to save themselves.

After 2008, banks were locked into institutional cages, but "Private Credit" transformed and became an important source of corporate loans.

After 2018, PE, BDC (Business Development Company, Business Development Company) and private equity credit took away US$300 billion from banks, most of which went to major Internet companies represented by SaaS.

After the 2020 epidemic, the global financial market was completely fragmented, and everyone needed to find their own anchor again. China's stock market embraces the concept of hard technology, and the U.S. stock market is All in AI. It is useless to have empty targets and a corresponding liquidity organization method.

Liquidity first comes from large-scale water releases. In 2020, China cut reserve requirements three times, the Federal Reserve restarted QE and ultra-low interest rates, and the "national fund purchase" once made Zhang Kun a Weibo celebrity.

But in 2026, the gunfire in the Persian Gulf shattered the dream, and the user mentality changed. Compared with the subsequent income, readily available living money is more important.The pursuit of liquidity constitutes the grand background of this round of RWA boom.

When Wall Street starts the on-chain process, it needs to convert the AUM of many products in its hands into trading volume, otherwise the repayment pressure will directly crush itself.

Assets are not money, only liquidity has transaction value. This is the important meaning of RWAfi. On-chain is a liability, and trading is an asset.

In other words, the market is revaluing the pricing of "liquidity premium", the redemption wave of private equity credit in the United States, and the sluggish issuance of closed fixed-income products by the Bank of China, all indicating that liquidity is taking away the status of income.

For this kind of transmission or shadow, the global financial market needs to find new connectors. Document No. 42 leaves a hole for "domestic assets + overseas issuance" and makes it clear that the bill is likely to be a way out for interest-earning arrangements. They have a tacit understanding with each other and will not break through the fight.

There is no doubt that blockchain will becomethe future of global finance, but the US's on-chain finance is Canton, China's on-chain finance is the digital renminbi, and global finance is the territory of Ethereum and Solana. The more confrontational, the more the Peace Hotel is needed.

Seeking liquidity from the world is the ultimate essence of this round of RWAfi.

Look for high-quality assets based on profits

I will never forget what happened, I just can't remember it.

Many people's impression of RWA still remains in the ancient memory of "all things being linked to the blockchain", but Aave co-founder Stani also has a special liking for photovoltaic blockchain. On the one hand, he warned that DeFi has a passive position of being reduced to private credit liquidity. On the other hand, he enthusiastically encouraged DeFi to move towards US$30 trillion in abundant assets (Abundance Assets) such as solar energy.

Unfortunately, the current practice mainstream of DeFi is precisely "private credit",and all electronic asset types, including U.S. debt, U.S. stocks, CLO (Collateralized Loan Obligation), and even OnRe packages the real reinsurance business on the chain and absorbs the liquidity on the chain to earn interest.

Physical-type RWA has become a thing of the past. If energy-type entities are put on the chain again, it can only be said that the future is promising.

To summarize, RWA is an asset-based asset, which is very rare, ETH is based on people's usage, BNB is based on Binance's trading volume, and BTC is based on the narrative of decentralization.

This is the problem. The RWA project team seems to want to bring liquidity to certain assets by putting them on the chain, but just like "antiques were also luxury goods at the time", high-quality projects do not lack liquidity off the chain, On-chain ≠ liquidity.

On-chain is a technical category, while liquidity is a financial category and cannot be confused.

Only in one case, on-chain can bring liquidity,That is, the on-chain action meets the liquidity reach expectations. For example, off-chain financial products that only institutional customers can purchase can be minted into a stable currency Vault that retail investors can deposit into.

Based on this, the RWA framework can be understood as three layers, from top to bottom: the asset layer, the tokenized RWA assets, and the liquid RWAfi.

• Assets

• RWA: asset-based assets

• RWAfi: Liquid asset-based assets

Regardless of the future of physical assets and photovoltaics, real-world asset types can be divided into four categories of products: stablecoins, stocks, debts, and funds. We usually think of stablecoins anchored to the U.S. dollar such as USDT/USDC and U.S. stocks as the most familiar.

However, it can be predicted that debt and funds will have stronger room for development, because they currently have the worst liquidity, and even just switching the purchasing process of institutional customers to the chain will not allow retail investors to participate directly.

Typical examples include the Guotai Junan tokenized funds GUSDT and GHKDT sold by Hashkey. Users can neither trade nor withdraw cash, and are generally one version behind the US market.

At least in BlackRock's view, tokenized funds will subvert Wall Street just as the Internet subverted the postal system. The reason is not complicated. Tokenized funds are oriented to the global market and will completely eliminate existing national boundaries.

Of course, each category of currency, stock, debt, and base can be divided infinitely. For example, stablecoins can be divided into anchors (USD <> crypto assets), or currencies (USD <> non-USD). Debt can be divided into issuers (national <> local <> enterprises), or by collateral (the bottom layer of CLO is loan <> the bottom layer of CDO is real estate).

But these are not important, and there is no need to specifically study the institutional differences between the United States, Southern Shenzhen and Singapore. There are numerous research reports, and these details are not the core concern of capital operations and entry and exit.

All we need to do is keep an eye on the technical service providers who help put real assets on the chain, especially the practices of Securites, SuperState, Canton and Ondo with American backgrounds. They will help us clear all obstacles.

After the SEC issued guidance clarifying the application of securities laws to tokenized products, Securites successively welcomed Giang Bui, the former head of Nasdaq’s Spot Bitcoin ETF listing, and Brett Redfearn, a former senior SEC official.

In addition to the revolving door of politics and business, traditional finance is also involved.

Invesco, a traditional asset management company, bought SuperState's $USTB tokenized treasury bond product, while Circle's USYC product even surpassed giants such as BlackRock's BUIDL in terms of issuance volume.

Even, the Canton chain backed by Goldman Sachs can "defeat" Ethereum to undertake the DTCC on-chain experiment.

Outside of the technical paradigm, the RWA middle layer has completely become a map coloring game for organizations, and they are competing for the four major categories of RWA product lines, and there is no clear sphere of influence yet.

However, at the RWAfi level, DeFi has shown a more tolerant attitude. For them, it is also beneficial to them to make more assets liquid.

However, the jump from RWA to RWAfi requires artificial creation of initial liquidity. If it only enters the existing stack as an underlying asset, there will still be a dilemma of "no one cares".

Where does liquidity come from?

On-chain liquidity has become a high-premium product.

If RWA is prepared to seek liquidity from DeFi, then 10% return is the baseline. Compared with less than 4% of U.S. bonds, it is basically impossible for existing RWA to make up the difference, let alone a higher rate of return, and retail investors have basically no motivation to buy.

So sand will be added to it to increase the yield.

1. Implicit fund withdrawal costs, or time limits, for example, Ethena's sUSDe redemption period has just been changed from 7 days to dynamic, and the underlying assets include more non-U.S. debt assets. In essence, it uses user funds to increase leverage, but it is not as volatile as the perpetual contract

2. Includes more subsidy components, such as its own token sales revenue. This is actually a controllable "fund plate". The underlying assets include U.S. debt to ensure minimum repayment. High interest rates are used to attract working capital, which is then locked, and the project party earns scale income from the capital

But the practice in 25/26 shows that from Huma to products such as Pharos and Bitway, the gap between off-chain and on-chain has always existed. Non-real-time three-party audits still add legitimacy to "non-liquidity" and will not enhance on-chain liquidity.

Although they appear to be interest-bearing stablecoins, the underlying layers of each protocol are difficult to analyze.

In addition, by adding leverage to TradFi, specious on-chain liquidity is also created. The most typical example is Trade.xyz on Hyperliquid, which is also expanding in the RWAfi field by adding trading leverage to oil and precious metals.

But we must realize that the liquidity caused by transactions and the illiquidity of private placement credit are crises with two sides. The truth is not complicated. Any mature market requires three elements:

• Low-cost funds

• High leverage strategy

• Large-scale market

Buffett used insurance float and ultra-long-term time leverage to dominate the U.S. financial market. Similarly, the U.S. banking industry resists the stablecoin interest-earning mechanism and also wants to monopolize users' demand deposits.

However, for perpetual contracts in the crypto industry, the cost of capital to maintain market existence is very high. This is also the price of sustainability. Otherwise, there will be no delta neutral mechanism. However, now, Ethena has partially given up the rate arbitrage strategy.

Even projects such as Saturn and APyx have begun to reversely use micro-strategy stocks ($MSTR) as the underlying asset to build on-chain interest-earning products, which has illustrated the trading crisis in the encryption industry.

While applauding the growth of Trade.xyz trading volume, don’t forget the crisis signal after Binance significantly lowered its VIP standards.

To sum up, the current problem is that we need to rely on U.S. debt + token subsidies + market-making strategies to make up for the 10% gap with U.S. debt, and even hope to get it even higher. There are even strange types of Phraos and Gaib raising funds on the chain to provide online loans to third world brothers.

Therefore, Indirect leveraged transactions's payment, fund, and bond markets are more important to the development of RWAfi, such as payment of the company's deposits and Galaxy's CLO loans with BTC as collateral.

Especially the latter, Galaxy's VC invested in Arch Lending. Arch allows users to lend stablecoins with BTC over-collateralization. Galaxy then packages Arch's debt into CLO products, and Sky injects capital into it through Grove to obtain corresponding returns. In this process:

• Users: No need to sell BTC and avoid capital gains tax on liquidation

• Arch: Obtain institutional-level "low-cost funds" without selling coins to support scale expansion

• Galaxy: Expanding the "large-scale market", CLO products with BTC underlying are easily accepted by DeFi protocols

• Sky/Grove: "Highly leveraged strategy", RWA assets other than treasury bonds, expected returns will be higher

Of course, things will not be perfect. The success of this case has nothing to do with Galaxy's multi-stakeholder interests. However, looking at the entire RWAfi market, this is a better and safer strategy to increase yields.

The bottom layer of the Galaxy CLO product is BTC as collateral. As mentioned earlier, products such as Saturn use US stocks as collateral. We might as well imagine the DeFi path in which US stocks are used as collateral.

U.S. debt, the U.S. dollar, and U.S. stocks, as the strongest financial assets in the world, are at different stages of development. U.S. debt and the U.S. dollar support the rapid development of U.S. dollar stablecoins and TMMF (tokenized money market funds), but the tokenization of U.S. stocks has just begun.

In addition to the regular processes ofissuance, management, custody, auditing, and liquidation, the types of leveraged trading in U.S. stocks are also extremely rich. According to the long-term and short-term holding rules, from brokerage margin trading (Margin Trading), to leveraged ETF products, to more flexible options (Options), it can basically meet the various needs of retail investors.

If you zoom in to institutional or professional investors, futures are close to the concept of perpetual contracts commonly used in the currency circle.

In addition, even if it is highly concentrated in the Seven Sisters, the U.S. stock market itself has more abundant liquidity. Technologies such as T+0 have nothing to do with asset issuance and will no longer be discussed excessively.

It is not that U.S. stocks go to the chain to find liquidity, but DeFi actively includes U.S. stock assets.

There is a counter-intuitive assumption here. DeFi actually lacks high-quality assets to expand the market size. Otherwise, BTCFi will not be invented repeatedly. However, large currency holders will give priority to protecting their principal, and the gap has not been filled yet.

Similar to Kamino and Morpho vaults, U.S. stocks can be used as a more flexible position adjustment asset under the guarantee of SuperState, bridging the two-way needs of TradFi and DeFi.

For comparison, U.S. bonds are the cornerstone of risk-free returns, and U.S. stocks are more liquid and volatile assets.

In short, the blockchain cannot only be used by TradFi as a technical facility, but needs to reversely use TradFi assets to expand itself.

Conclusion

The path to large-scale markets.

The space limit does not allow us to discuss stablecoins too much. On the one hand, stablecoins have grown into a large-scale market with the most abundant liquidity. On the other hand, the interest-earning, foreign exchange (non-USD stablecoins) and asset-based stablecoins on the anchor chain are all constantly changing and will be written separately later.