Abrdn and Archax in Race to Tokenize Traditional Finance

• A New Tokenized Asset on the Horizon
• Regulated Crypto Firms Taking Big Steps
• Leaning on Blockchain's Efficiencies
• Opening Up to New Investors
• Intrigue Among Potential Customers
• Innovation in Response to Interest Rates
• Plans for the Future
• Next Steps: MMF Ownership Token As Collateral
• Abrdn's Pipeline Plans
• Exploring Other Use Cases

A New Tokenized Asset on the Horizon

Think about a token that signifies ownership in a money-market fund, operates as a yield-bearing stablecoin, while also serving as collateral for trades. This is the innovative idea that UK-based investment firm abrdn and regulated exchange Archax are working on. They are competing to be the pioneers in tokenizing traditional assets.

Regulated Crypto Firms Taking Big Steps

Archax, among the earliest crypto companies to be regulated by the Financial Conduct Authority (FCA), and abrdn, with a whopping $626 billion of assets under management, launched an institutional-grade money-market fund token in October. These giants are now exploring its potential, courting clients seeking new, flexible methods to allocate capital.

Leaning on Blockchain's Efficiencies

Major financial corporations are beginning to understand the operational and cost-saving efficiencies that blockchain offers in representing assets. However, few have gone beyond the initial testing phase. To start, clients need to be onboarded, wallets need to be whitelisted, and the token is only accessible to professional investors, according to Simon Barnby, Archax's chief marketing officer.

Opening Up to New Investors

The tokenized portion of the abrdn fund, which utilizes the Hedera$0.089 -1.07% Hashgraph system of shared ledgers, is available for as low as $5,000. This minimal investment requirement could potentially attract a new breed of investors into the sphere.

Intrigue Among Potential Customers

"We're engaging with a lot of payment firms and people who are possibly holding onto a stablecoin like USDC or USDT, which doesn't generate any yield. Now with a shift toward a higher interest-rate climate, businesses want to make their assets work," stated Barnby.

Innovation in Response to Interest Rates

This shift in interest rates is not only fast-forwarding tokenization efforts that focus primarily on easy targets like treasury bonds, but it's also prompting decentralized finance (DeFi) to develop new models of yield-bearing stablecoins.

Plans for the Future

In the coming year, Archax plans to introduce trading pairs of the abrdn money-market fund (MMF) token and bitcoin (BTC). This would mean that rather than trading BTC against the U.S. dollar or USDC, users can trade bitcoin against U.S. dollar MMF tokens.

Next Steps: MMF Ownership Token As Collateral

The obvious next step, which has not been discussed publicly, is using the MMF ownership token as collateral. This is a common practice in DeFi where assets are borrowed against and lent out. A token that represents ownership in the money-market fund could be used as collateral in regulated DeFi, Barnby hinted.

While the smaller DeFi universe may seem interesting, traditional markets outweigh it in scale.

Abrdn's Pipeline Plans

Abrdn has a vast range of financial products planned for tokenization, starting with something straightforward as there's already demand, signifying it was meant for the crypto native investors, said Duncan Moir, the firm's alternative investments leader.

Exploring Other Use Cases

Following conversations with various institutions, it became evident that posting for collateral might be a larger use case, Moir shared. Swap dealers accept money-market funds, so it could be used to post margin on a swap, for instance. He added that he'd be interested to see if it can be used for the settlement of tokenized securities as well.

Edited by Jonathan Stoker