Securitize Introduces sToken for Liquidity in Real-World Assets

Tokenization firm Securitize has unveiled a new method for gaining liquidity from real-world assets (RWAs) while still earning yield through its innovative sToken. This architecture is a product of collaboration between Securitize's Credit subsidiary and the synthetic dollar project Elixir, as announced on Tuesday.

sToken Overview

Based on Ethereum’s ERC-4626 token standard, which provides an interface for launching vaults representing shared interests in yield-bearing tokens, sTokens enable institutional investors holding Securitize-issued RWAs to convert these assets into deUSD, Elixir’s decentralized U.S. dollar token, all while still profiting from their investments.

In essence, the joint deUSD RWA Institutional Program creates opportunities for token holders to leverage their assets through a composable token that can be utilized across the DeFi sector, without forfeiting capital generated by investments like BlackRock's tokenized Treasuries fund, BUIDL.

Growing Interest in Tokenization

This initiative reflects the rapid experimentation occurring within the blockchain tokenization sector and signifies its expanding capabilities. Major financial institutions, including BlackRock, KKR, UBS, and HSBC, are exploring blockchain to transform asset issuance, transfer, and utilization.

Tokenization provides innovative ways to deploy assets and offers novel possibilities for earning returns. Blockchains enhance the efficiency of global transactions, allowing for quicker settlement and broader access to markets.

Challenges to Adoption

Despite its potential, the widespread adoption of RWAs faces hurdles, including legal and technical challenges, particularly regulatory restrictions on transferability and limited DeFi integration. The companies stated, "The next phase of RWA Total Value Locked (TVL) growth requires compliant liquidity and composability solutions for these assets."

Initial Offerings

The sToken initiative will start with accredited holders of the BlackRock USD Institutional Digital Liquidity Fund (BUIDL token), with plans to support other assets, including Hamilton Lane’s SCOPE fund. BUIDL, which is backed by short-term U.S. Treasuries, is the largest on-chain money market fund with over $520 million in assets.

Philip Forte, founder and CEO of Elixir, remarked, "For the first time ever, holders of tokenized real-world assets can natively use their assets on-chain in DeFi, accessing unified liquidity via deUSD." He noted that deUSD serves as a solution for Securitize users looking to utilize their capital while navigating legal constraints concerning BUIDL.

Partnership and Future Developments

Under this arrangement, Elixir will manage a derivative of BlackRock’s BUIDL token known as sBUIDL, minted by Securitize users. Elixir expects to benefit from rapid TVL growth driven by its vast and varied Securitize customer base, while also distributing deUSD across multiple blockchains.

In October, BlackRock, Securitize, and Circle announced a partnership enabling BUIDL holders to exchange their shares with Circle for USDC and use Circle’s smart contracts to move BUIDL on-chain.

Currently, users involved in the Arthur Hayes-backed project Elixir supply ETH to a contract referred to as the Apothecary to mint its dollar-pegged token and earn points called Potions. Notably, Securitize minters will not earn these points, ensuring there is no dilution or additional liquidity and backing risks for Elixir.