LeadBlock: RWA backed USDC Vault

TLDR

LeadBlock will become the risk curator for a USDC MetaMorpho vault that will lend against real world assets (RWA).

The vault will take advantage of the growing asset base of onchain RWA which are issued by start-ups and financial institutions. It will enable access to expertly selected real world asset driven yields, capture incentives from RWA issuers and enable leverage strategies on RWAs.

The vault’s ultimate objective is to create utility and defi composability for onchain RWA. We believe this is a key step to drive adoption and ultimately bring all traded assets on blockchain rails.

Initially the vault will lend against tokenized U.S. Treasury Bills (mTBILL issued by Midas) on Morpho Blue markets.

RWA Opportunity

Real world assets are a fast growing asset class on-chain. AUM was very low in early 2023 with only a single active player. AUM has now reached more than $800mn mainly in tokenised T-bills issued by a diverse pool of players which includes start-ups and financial institutions.

We see accelerating competition, innovation, new entrants, and VC appetite to fund RWA projects. This will drive further AUM growth through 2024 and beyond. We also note growing activity by financial institutions for natively issued onchain RWAs which could be supported by the vault.

On-chain tokenised T-bills AUM reaches $800mn+ (rwa.xyz)
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We see high demand for the on-chain risk free rate. Growth has been particularly rapid as discussed above however the current $800mn of tokenised t bills is dwarfed by the $140bn of stablecoins which offers no yield to holders while issuers comfortably invest in T bills to generate 5% a year. Stablecoin users are therefore loosing out on $7bn of unearned yield annually. We expect onchain RWA’s and in particular treasuries and bonds to catch-up and surpass stablecoins over time.

There is a significant amount of onchain captive capital held by DAOs, start-ups, foundations, funds, exchanges and more which are seeking yield or return opportunities onchain which are not tied to crypto performance. This is also apparent from onchain retail users as seen by the success of yield products offered by exchanges and including by Coinbase, Binance, Bitpanda, Bitstamp etc. Low staking yields is also a driver here.

We also see growing appetite by funds in particular market neutral players that are active in both tradfi and onchain to leverage opportunities arising from tokenised RWAs. This will lead to improved liquidity, lower spreads etc. in turn benefiting all users.

The long-term vision is to enable blockchain and DeFi to be adopted by institutions and serve as the new financial market rails. This is a vision shared by leading financial institutions. For example we can highlight that Larry Finck and David Solomon respectively CEOs of BlackRock and Goldman Sachs have said they see blockchain’s potential to underpin future financial market infrastructure.

Initial collateral asset & rewards: mTBILL by Midas

LeadBlock will become the risk curator for a USDC MetaMorpho vault that will lend against a selection of RWAs. Lenders can select the vault and supply liquidity to earn yield through Morpho Blue which is a decentralized immutable protocol which enables overcollateralized lending and borrowing of any digital asset. It distinguishes itself notably through the simplicity of its code, low gas fees, and self adjusting yield curve which adapts to market conditions.

At launch the pool will lend against tokenized T-bills in the form of the mTBILL token. The mTBILL token is backed 1:1 by short-dated U.S. Treasury securities via an ultra-liquid BlackRock Treasury Bond ETF (iShares $ Treasury Bond 0-1yr UCITS ETF) which has a total AUM of $13bn. The token is issued by Midas and holders are free to redeem mTBILL for the net asset value of the underlying at any time.

Of particular importance for RWAs Midas has implemented an institutional grade legal setup for the tokens. It is an onshore German legal structure which is bankruptcy remote and employs institutional partners acting as securities agents and trustees. More here.

At launch the pool will be incentivised by Midas with USDC rewards for lenders.

Roadmap

  • USDC RWA backed vault deployed
  • Vault opens for lenders and allocates to USDC/mTBILL Morpho Blue market
  • USDC incentives by Midas are announced and launched
  • Additional RWA assets are admitted as collateral with potential incentives

About LeadBlock

LeadBlock Partners has been an active investor in the blockchain space across venture and liquid assets since 2019. The focus has been to catalyse adoption of blockchain and digital assets by institutions and companies both crypto native and from tradfi/web2. Investments include companies such as Bitpanda, Talos, Kiln, Tesseract, Treehouse Finance, Token Terminal and more.

The team combines traditional finance experience at Goldman Sachs, Rothschild, Barclays, GE Capital & more with crypto native experience. The combination is key to assess risk in a RWA collateralised defi lending pool which merges both worlds.

On top of our investment experience both in traditional assets and digital assets we bring onboard a deep network of projects, investors, companies and institutions active in the space to enable the success of the LeadBlock RWA Vault.

Disclaimer - Please Read

LeadBlock only acts as risk curator of the vault. Your only rights and remedies as a vault user will be those included in Morpho’s Terms of Use. Please read below:

Please refer to Morpho Terms of Use here

Please refer to LeadBlock disclaimers here

Disclaimer - mTBILL

THE MTBILL TOKENS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND (I) MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT ACCORDING TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS AND (II) MAY BE OFFERED, SOLD OR OTHERWISE DELIVERED AT ANY TIME ONLY TO TRANSFEREES THAT ARE NON-UNITED STATES PERSONS.

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