The market for tokenized non-US government debt is growing. What does this mean?
1. Macro investors want exposure to local currencies, not just US dollars. Until recently, the only way to do this was going through local rails.
Tokenization makes macro trades accessible by bringing assets onchain. Some of the most prominent examples to date include:
- Euro money market funds
- Hong Kong Dollar money market funds
- Chinese RMB money market funds
- Mexican government bonds
- Brazilian government debt
- Turkish money market funds (hello 👋)
2. The holder market is still in its infancy.
According to
@RWA_xyz, there are currently ~9.9k holders of onchain non-US government debt. And yet, the amount of distributed value averages out to $1.4B since August 2023. Currently, profits sit within a concentrated number of holders.
3. Investing in global government debt has historically been a TradFi opportunity, not a DeFi one. In DeFi, investors traded assets for DeFi-native yield. We're at a juncture now where:
- DeFi traders are mapping macro opportunities. For them, it's a new source of yield. Of course, this yield has unique risks because it is real, global risk, but that is precisely also its appeal.
- TradFi investors are being onboarded into tokenization and doing their due diligence on the process involved. For them, this is a faster way to access trades they are already involved in at the macro level.