Onchain Spreads' Impact on Tokenization

Key Insights

• Tokenized treasuries have been a major driver of RWA adoption, benefiting from negative spreads between onchain yields and U.S. T-Bills.
• With the Federal Reserve expected to lower interest rates, onchain yields are likely to exceed T-Bills, which could lead to a less favorable environment for tokenized treasuries.
• Tokenized treasury protocols still have growth potential by tapping into idle stablecoins held by liquid funds, venture funds, and exchanges, representing up to a $6 billion opportunity.
• As onchain yields grow more competitive with traditional finance, RWA protocols could shift focus to exporting these yields to traditional markets. This would create a bridge between the two systems, bringing new capital onchain and lessening RWAs' dependence on traditional interest rates.

The Federal Reserve is likely to implement its largest rate-cutting cycle in crypto's brief history, excluding 2009 when the Bitcoin network was less than a year old. While numerous questions surround how the now $2 trillion crypto market will respond to declining interest rates, this report will examine the potential implications for Real World Assets (RWAs), with a focus on Yield-Bearing RWAs.

What’s Fueling RWA Growth?