Real World Assets (RWAs), Real World Application

It was once believed that stablecoins and other tokenized real-world assets (RWAs) would be the gateway for mainstream adoption of crypto. A decade ago, forums like bitcointalk.org extensively discussed remittances. With the rise of smart contract chains, the industry began to imagine Wall Street transitioning to on-chain stock settlements, replacing DTCC.

Stablecoins and RWAs initially gained traction through crypto-native applications, not the general public. Crypto enthusiasts use stablecoins for cross-exchange arbitrage and as a haven from volatility. Once the infrastructure became reliable, broader uses like payments, remittances, and hedging against inflation in currencies like the Turkish Lira and Argentinian Peso emerged. These applications, though not originally designed for crypto, are rapidly growing in regions like the Global South.

Other RWAs are likely to follow a similar path. T-bills were tokenized as crypto-native entities, like DAOs and startups, sought yield on their stablecoins after the Federal Reserve’s rate hikes. Now, crypto-agnostic applications are emerging. For example, crypto neobanks outside the US let users save in USDC/USDT and compete to offer secure US yields.

Stablecoins: Hedging and Payment

Stablecoins are settling an astounding $10 trillion onchain annually, far surpassing PayPal, comparable to Visa, and approaching the scale of ACH. This remarkable milestone has been achieved in just a few short years.

Equally impressive is the fact that the total supply of stablecoins stands at around $150 billion. This means that each dollar of stablecoin is transacted 60–70 times annually on the blockchain.

These achievements wouldn’t be possible without the advantages of a borderless and permissionless ledger. Despite criticisms that stablecoins (and other RWAs) are not truly crypto-native, practical use has proven their value. The ability to move traditional assets seamlessly on a global, unrestricted ledger is highly valued by the market.

Stablecoins: Speculation vs. Real-World Usage

It can be argued that a significant portion of on-chain stablecoin volume stems from speculative activities rather than practical uses like currency hedging and cross-border payments. While it’s impossible to determine the exact split between speculation and real-world usage, even if only 1% of the $10 trillion annual volume is for real-world applications, it represents a substantial figure. Our observations align with this data.

For years, we’ve personally experienced the benefits of on-chain payments, frequently using USDC to fund startups. Many of these startups also use USDC or USDT to pay their employees and vendors. Our interest in this area grew a year ago when Felipe, an AllianceDAO alumnus, shared insights about Colombia’s peer-to-peer stablecoin market, where people meet in shopping malls to exchange physical Peso bills for Tron USDT.

In the months that followed, we examined over 100 stablecoin-related startups across Latin America, Africa, Southeast Asia, and Eastern Europe. The most notable finding is that the majority of these startups with live products show early signs of product-market fit, growing at least 10% month over month, regardless of team quality.

Other RWAs: Diversification

Stablecoins are the most prominent example of RWAs, but other asset classes are also being tokenized and moved on-chain.

Currently, around $3 trillion, or roughly 1% of global wealth, is stored onchain. This impressive statistic highlights the growing adoption of blockchain technology for storing value. Holders of these assets have two primary options: keep them as a store of value or exchange them for other assets.

Historically, crypto holders have mostly exchanged their assets for other crypto-native ones, aiming to sell at higher prices or generate yield. However, crypto assets tend to be highly correlated and volatile. As the crypto market matures, diversification into other asset classes is inevitable.

Diversification is a well-established strategy for managing risk. The world’s largest hedge fund, Bridgewater Associates, built its All Weather Portfolio on the principle that combining uncorrelated sources of returns leads to better risk-adjusted performance. The fund’s massive growth underscores investors’ demand for diversification. Similarly, the BTC ETF has garnered strong interest because it offers a non-correlated return for traditional financial asset managers.

RWAs provide crypto holders with a means to diversify, offering access to less volatile and uncorrelated returns. For crypto investors, RWAs serve a similar role as the BTC ETF does for traditional financial investors.

As the infrastructure for RWAs matures, we anticipate the emergence of crypto-agnostic use cases. For instance, using tokenized equities and real estate as collateral for loans or enabling global portfolio construction without the complexity of legal and banking systems for each asset. This represents the second phase of RWA adoption, where use cases extend beyond the crypto-native sphere.

Conclusion

For years, we’ve sought the first major non-speculative crypto application, and it turns out it’s already here: crypto-agnostic users utilizing stablecoins to hedge against currency debasement and make cross-border payments. Despite their stability and use in emerging markets, stablecoins receive little attention.

Stablecoins are just the beginning of RWAs. There’s strong demand from crypto-natives for tokenized on-chain treasuries, and the next step is to tokenize stocks, real estate, and luxury items. These historically uncorrelated, high-return assets are now accessible to the trillions in on-chain wealth-seeking diversification.