Renowned Crypto Trader Plans to Tokenize U.S. Treasuries and Expand to Corporate Bonds on Blockchain
The banking crisis in March created a barrier for crypto companies in accessing traditional banking services, hindering a fundamental yet essential task for any business - finding a secure location to store surplus funds.
The current situation has presented a valuable opportunity for a start-up with a reputable background to introduce cash equivalents to the world of cryptocurrency, paving the way for the company's larger goal of digitalizing the corporate bond market. This can be seen as a kind of Trojan Horse tactic, leveraging the existing demand for stable and secure cash-like instruments within the crypto industry.
PV01 is a start-up, co-founded by Max Boonen, who also played a role in the establishment of the leading crypto market maker B2C2. The company's name is derived from bond terminology, and it has launched its first product - on-chain, tokenized versions of one-month U.S. Treasury bills. These bills are considered to be among the most secure assets globally, and investors view them as comparable to traditional fiat cash. By offering a tokenized option, PV01 is addressing the needs of crypto companies, who are seeking safe and reliable investment options following the banking crisis in March. Furthermore, this represents a significant step towards the company's overarching objective of digitizing the corporate bond market.
“It’s a cash management product,” Boonen, who used to work as an interest-rates trader at Goldman Sachs in London, said in a recent interview. “It’s not our end game, but it’s in high demand.”
He continued: “We target either the crypto firms that find it difficult to move money back and forth [between the crypto space and conventional financial system] – which is most – and also people who have a lot of wealth in crypto who are simply unable or unwilling to bring it back into the fold of the traditional system And those are two pretty big segments.”
PV01 has aspirations of facilitating corporations to issue bonds on a blockchain. This initial endeavor into Treasuries serves as a demonstration of that concept. Instead of seeking out a bond issuer, PV01 plans to procure and tokenize fixed-income products from what is arguably the safest issuer in the world: the U.S. government. However, PV01's ultimate objective is to target companies for this service in the long run.
“This goes back two years ago. I thought we ought to have bonds on a blockchain like we have equity tokens,” Boonen said. B2C2 was the “second-largest player in lending after Genesis, and it felt strange to me that private, bilateral deals drove it.”
And then last year’s credit crunch, fueled in part by the demise of hedge fund Three Arrows Capital (3AC), “was made more severe by the fact that no one knew who owned what debt and who owed what debt.” On-chain bonds could solve that.
Other companies have already made attempts to tokenize securities and bring U.S. government debt onto the blockchain before PV01. Just recently, Maple Finance, a lending protocol based on blockchain, introduced a cash-management product that grants access to one-month Treasurys. In addition, Ondo Finance has announced a stablecoin backed by money-market funds this month, which explores similar territory.
The attraction of one-month U.S. bills lies in their increased yields, which have risen to about 3.5% due to the Federal Reserve's rate hikes. In the past, it was simple to do nothing and invest in stablecoins while interest rates were at 0%. However, Boonen remarked that PV01's tokenized bills enable customers to reap the benefits of these favorable rates while maintaining their funds in the cryptocurrency sphere.
“If you want to buy T-Bills, you need fiat dollars,” he said. “But if you could just use stablecoins [to buy them] you remove one layer of the trade.”
To obtain the bills, PV01 has partnered with two brokers whose identities have not been disclosed. Once acquired, the bills are placed into a special purpose vehicle (SPV).
Despite being U.S.-issued debt, PV01 won’t immediately operate in the U.S., where regulation and scrutiny of crypto is getting stricter. “We’re only going to offer our products broadly in the United States when we have a clear sense that it’s legal to do so based on the setup that we have put in place,” he said. “And if it’s never possible, then we never will.”
Source Coindesk
