Cryptocurrency companies are increasingly relying on traditional financial assets to attract customers in a weakening market. More decentralized financial companies have bought up Treasurys to boost the profitability of their blockchain-based services.
Decentralized instruments, known as DeFi, allow users to borrow, lend, earn interest and trade digital assets without intermediaries. Years ago, DeFi promised its investors high returns, but after the Central Bank of America raised rates on speculative asset manipulation, the returns on interactions with peer-to-peer cryptocurrency platforms plummeted.
As of April 25, one of DeFi's largest platforms, Aave, was offering its users the benefit of a 2% monthly deposit rate, but such a promotion was only possible when working with steilbitcoins. Maple Finance, for example, prefers high yields with security, which can be achieved by investing in U.S. government bonds. The company launched a product last week that yields the interest equivalent of a one-month Treasury bill, minus deposit fees, offering a yield for users of around 3.4%.
The product works as follows: non-U.S. accredited investors can deposit U.S. dollar coins into a “money management pool” and receive tokens in return, proving their ownership. The pool then extends credit to an entity run by cryptocurrency hedge fund Room40 Capital, which invests client deposits in one-month Treasury bills.
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The new Maple Finance products have their supporters. Large crypto investors are interested in holding Steilbitcoins because they are suitable for fast trading and free profits. Usually, some traders can sell their holdings of stalebitcoins and place them in treasury bills directly, but not everyone wants to go to a third party and pay a commission.
According to DeFi Llama, the value of assets held on DeFi platforms has dropped to about $49 billion from a peak of $180 billion in 2021, so some cryptocurrencies agree with what financial institutions are accepting.
Startup Ondo Finance launched a tokenized version of the iShares Short Treasury Bond ETF with a yield of 4.65%. The fund, which also includes a small portion of USD Coin and USD, recently surpassed $100 million in assets under management.
Ondo Finance CEO Nathan Allman said his firm originally launched the tokenized Treasury product to attract startups and DeFi platforms whose goal is to generate revenue from their corporate treasury funds. OTC trading platforms want to use the product as an alternative to Stablecoin to settle their trades or as collateral for loans.