Ripple, a provider of enterprise blockchain and crypto solutions, is allocating $10m to tokenized treasury bills with Open Eden after also collaborating with Archax, the UK regulated digital asset exchange, broker and custodian, to tokenize real world assets (RWAs).

On 1 August Ripple said it will allocate $10m into tokenized US Treasury bills (TBILLs) on OpenEden’s tokenization  platform. This is part of a larger fund that Ripple will allocate to tokenized T-bills provided by a number of issuers.

At the same time, OpenEden will bring tokenized US Treasury bills to the XRP ledger (XRPL) and its users for the first time. Jeremy Ng, co-founder of OpenEden said in a statement that purchasers will be able to mint its TBILL tokens via stablecoins, including Ripple USD when it launches this year.

The tokenized treasury market has grown in the last two years and traditional asset manager BlackRock launched its first tokenized fund in March this year, in partnership with Securitize, the digital asset securities firm. The BlackRock USD Institutional Digital Liquidity Fund (BUIDL)  gathered more than $500m in a record time of four months.

Markus Infanger, senior vice president at RippleX, told Markets Media that the market has not fully grasped the degree of validation that BlackRock brings to tokenization as the largest asset manager in the world. RippleX is the business unit at Ripple supporting partnerships and developer growth around the XRP ledger.

“The launch of spot Bitcoin ETFs got more noise but, in my personal view, BUIDL is a way bigger deal because it marks the beginning of blockchain being used for utility in financial markets at scale,” he added. “BUIDL opens the floodgates and Ripple has been about that since day one.”

Crypto exchange Coinbase said in its The State of Crypto report in June this year that the tokenized asset market is expected to hit $16 trillion by 2030.

“Government securities are driving real-world asset tokenization, and are the only asset class where prominent US brands – led by BlackRock and Franklin Templeton – are tokenizing,” said Coinbase. “Recent high interest rates have boosted demand for safe, high-yielding T-bills onchain, sending the value of tokenized US Treasury products over 1,000% from January 2023, to $1.29bn as of May 31, 2024.”

OpenEden said it recently exceeded $75m in total value locked for its tokenized treasury bills and that it is also the first, and only, tokenized Treasury product to receive an investment-grade A rating from Moody’s. Infanger continued that Ripple is working with OpenEden as it is one of the leading tokenization platforms in terms of volume.

“They have a strong track record in understanding both traditional finance and decentralized finance,” he added. “We look at Ripple as a champion in terms of bridging the gap between TradFi and DeFi, which is what we have been doing since day one.”

Financial infrastructure

Ripple is well-known for facilitating cross-border payments across its blockchain network in fiat and cryptocurrencies. However, Infanger said the firm was launched to allow blockchain technology to work with the traditional financial system so that it can be transformed into a more productive infrastructure.

There are many other blockchains but Infanger argued that XRPL is differentiated as one of the oldest protocols, as it was created in 2012, and has been battle-tested in the real world.

“XRPL has a track record of consistently and securely facilitating transactions in three to five seconds throughout  bull and bear markets and has processed over 2.8 billion transactions,” he said.

Ripple said that XRPL has been the home of over 1,000 projects, processed more than 2.8 billion transactions without failure or security breach since 2012 and supported over five million active wallets with a network of over 120 validators. Infanger continued that XRPL has a native decentralized exchange and tokenization baked into the protocol, which means it is more secure than using smart contracts.

“We have a roadmap of Ripple working with the financial community which we call institutional grade DeFi,” he added.

For example, in June this year Ripple and Archax, the UK’s first Financial Conduct Authority regulated digital asset exchange, broker and custodian, announced an extension to their existing collaboration to bring tokenized real world assets onto XRPL.

Tipping point

Archax has tokenized real world assets including equities, debt instruments and money market funds.

Graham Rodford, chief executive of Archax, said in a statement in June: “We have hit the tipping point for mainstream adoption of digital assets for real world use cases. Financial institutions are now understanding this and we are excited to play our part in helping them to embrace the technology by bringing their assets onto the XRPL.”

Infanger agreed that Ripple is having more conversations with financial institutions who want to explore production use cases for tokenization, especially with those who use its custody product. Ripple acquired Swiss digital asset custodian Metaco in 2023.

HSBC said last year that it plans to launch a digital asset custody service for institutional clients focusing on tokenized securities with Metaco.

“What gets me the most excited this year is the major difference in the conversation with large financial institutions who want to engage in tokenization of real world assets,” said Infanger.

For example, a large asset manager wants to launch a tokenized money market fund to improve collateral mobility and credit risk management. Another institution is working with an insurer to issue a cyber security insurance-linked which can be distributed to a broader range of investors if it is tokenized.

However, Infanger acknowledged that more regulatory clarity is needed to bring real world assets such as real estate on-chain. He also stressed the importance of interoperability across blockchains so that they seamlessly work with each other, and interoperability with traditional financial market infrastructures.

“There has been a lot of hype around tokenizing real world assets,” Infanger said. “However, I think it is under hyped and we are still only scratching the surface.”

Consultancy McKinsey & Co estimated in June that total tokenized market capitalization could reach around $2 trillion by 2030 (excluding cryptocurrencies like bitcoin and stablecoins like Tether), driven by adoption in mutual funds, bonds and exchange-traded notes (ETN), loans and securitization, and alternative funds.

“In a bullish scenario, this value could double to around $4 trillion, but we are less optimistic than previously published estimates as we approach the middle of the decade,” added McKinsey.