Rho Labs is building an interest rate derivatives market which is initially for crypto markets, but has a long-term vision of traditional markets moving onchain. The developer of the Rho protocol said it is the first crypto-native interest rates venue.

Alex Ryvkin, founder of Rho Labs, told Markets Markets that the initial goal is to become the preeminent provider, and the most recognized player in the market, for interest rates derivatives which are relevant to crypto traders.

He said that since the firm launched in 2022, there has been an evolution of crypto markets with rates, especially perpetual futures funding and staking, becoming a critical component of crypto traders’ portfolio returns as they look to hedge their positions and ensure predictability of their cashflow.

Perpetual futures do not have an expiry date and allow traders to speculate on the underlying asset prices indefinitely, but require hourly variation payments. Onchain margin payments can be near real-time. However, volatile crypto funding rates can significantly impact the profitability of trading, especially as funding trades can turn negative. Therefore, Rho Labs’ futures for perpetual funding rates can help traders hedge this risk.

Crypto staking is the practice of locking digital tokens to a blockchain network in order to earn rewards, which is usually a percentage of the tokens staked. Staking has caught the attention of institutional investors, according to Rho. For example, in the first quarter of 2024 Fidelity filed with the SEC for a spot ether ETF with a staking component.

Interest rates are the largest single asset class in traditional financial markets with a total value of open contracts exceeding $500 trillion according to Rho Labs, The firm has facilitated over $7bn of notional volume since its beta launch in June 2024, according to the firm.

Michael Lie, global head of digital assets at Flow Traders, said in a statement: “Our investment reflects our commitment to advancing financial technology that enhances market efficiency and liquidity, and as institutional adoption accelerates, Rho is scaling  at the perfect time to lead the evolution of on-chain interest rate derivatives.”

Market maker Flow Traders took part in Rho Labs’ $4m seed funding round in February 2025. The funding round was led by CoinFund, a crypto-native investment firm, with participation from market maker Auros and other existing investors including Speedinvest. The majority of funds will be used for developing products that Rho Labs plans to roll out in the next three to six months.

Ryvkin argued that as tokenization of real world assets takes off, there will be continued to be more issuances of digital bonds onchain. He said: “We believe that it is when, not if, when tokenization become real.”

As more bonds are issued onchain, and bond market trading takes place onchain, he said more traders will also want to manage interest rate risk onchain

Capital efficiency

Capital efficiency is critical for institutional participants in traditIonal interest rate trading. For example, CME Group, the traditional derivatives exchange, said it provided capital efficiencies for its customers of $20bn per day in its interest rates futures and options complex in 2024.

Ryvkin said capital efficiency is also important for crypto market participants and Rho enables perpetual futures funding, staking and lending rates in one venue. Rho argued it has turned perpetual funding, which is the most important  family of rates in crypto, into a liquid tradable asset class, opening up new trading opportunities for leveraged trading, basis trading, and enhanced yield strategies.

Julien Auchecorne, head of ventures at Auros, said in a statement that interest rate volatility is one of the greatest hurdles to deploying risk due to the unpredictable cost of capital and inadequate hedging mechanisms. He said: “Rho is developing a solution to these hurdles that will accelerate market adoption on increasingly robust foundations.”

Capital is extremely fragmented in the crypto ecosystem with collateral sitting at many different venues, together with a lack of full-service prime brokers according to Ryvkin.

“We are not  trying not to create another pocket where participants have to keep collateral,” he added. “We are trying to skip the  custodial exchange model, because we think that is on the way out.”

Ryvkin was formerly the chief product officer of Copper.co, which  operates ClearLoop. This network enables institutional clients to trade on multiple digital asset exchanges while keeping funds in secure custody with Copper, which decreases counterparty risk. Rho Labs is looking to work with Copper and other custodians as the venue will not hold collateral.

“For the type of institutions that we want to have as clients, they should be able to use the normal mechanism of keeping collateral at a custodian and performing periodic settlements,” he added.

Another aspect of capital efficiency that will be relevant to traditional finance institutions is interest-bearing stablecoins. Stablecoins have been used in digital finance to transfer value and liquidity 24/7/365 seamlessly around the globe, in contrast to a fiat currency such as the US dollar that is used in traditional banking. They are backed by collateral to maintain a stable price over time by pegging value to a reference asset such as a fiat currency or a commodity.

“There is no term structure for interest bearing stablecoins, and we can help create that term structure,” said Ryvkin.

In February 2025 Figure Markets said it had launched YLDS, the first interest-bearing stablecoin native to a public blockchain that is registered with the Securities and Exchange Commission. YLDS offers holders the ability to earn interest, transfer securities peer-to-peer, and transact 24×7. Mike Cagney, chief executive of Figure Markets, said in a statement that exchange collateral is one of the possible uses for YLDS.