The March banking crisis made it harder for crypto companies to access conventional banks, erecting an obstacle to a mundane yet vital task for any business: finding a place to park excess cash.
This has created a sort of Trojan Horse opportunity for a startup with a well-known pedigree to bring cash-like instruments to the cryptocurrency space, laying the groundwork for the company’s broader ambition to digitize the corporate bond market.
The startup is PV01, whose name is a piece of bond jargon, and it was co-founded by Max Boonen, who also helped get the giant crypto market maker B2C2 off the ground. Its first product: tokenized, on-chain versions of one-month U.S. Treasury bills. Those are among the safest assets in the world, so investors treat them as equivalent to plain-vanilla fiat cash. A tokenized version brings something crypto companies may be yearning for post-March.
“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 endgame 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.”
But PV01 dreams of getting corporations to issue bonds on a blockchain. This initial foray into Treasurys works as a proof of concept for that; rather than finding a bond issuer, PV01 will simply purchase and then tokenize fixed-income products issued by probably safest issuer in the world: the U.S. government. But companies are the longer-term target.
“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 [CoinDesk sister company] 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, “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.
PV01 isn’t the first firm to attempt tokenized securities or to try bringing U.S. government debt on-chain; earlier this week, blockchain-based lending protocol Maple Finance announced a cash-management product that also provides access to one-month Treasurys. Also this month, Ondo Finance announced a stablecoin backed by money-market funds, exploring similar turf.
Part of the allure of one-month U.S. bills is their yields have risen so much – to around 3.5% – because of the Federal Reserve’s rate hikes. “When rates were 0%, it was easy to do nothing. Stick it in stablecoins and wait,” Boonen said. PV01’s tokenized bills mean customers can have the benefit of those juicy rates while still technically keeping their money in crypto.
“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.”
PV01 is working with two unspecified brokers to secure the bills, which are then put in 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.”
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