BlackRock’s BUIDL seeks 75% of Ethena’s $45 million reserve fund for RWA investment

USDe issuer Ethena wants to invest some of its reserves into tokenized US treasuries. In a governance post on July 16, the protocol disclosed its intention to allocate $235 million in USDT stablecoin from its collateral assets and $45 million from its Reserve Fund to real-world assets (RWA) products.

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This move follows a similar trend by several DeFi protocols, which opt to invest a portion of their reserves into tokenized RWAs due to the relative stability of these assets and the ease of investing directly on-chain. Several funds are already requesting part of the allocation.

BlackRock’s BUIDL, others bid for Ethena’s reserve allocation

Following the governance post , which requires that entities seeking allocation submit their application to Ethena Governance, many funds are already applying. BlackRock and Securitize tokenized fund BUIDL are among the several who have applied to Ethena to allocate to their fund.

The Ethereum-based money market fund applied for an allocation of $34 million out of the $45 million in the Ethena Reserve Fund and has offered around 4.88% APY after fees with an annual fee of 0.50%.

Despite launching less than five months ago, BUIDL has emerged as the dominant RWA project thanks to its association with BlackRock. The protocol controls over 28% of the market, with over $500 million in assets under management (AUM).

BlackRock BUIDL’s Supply (Source: Dune Analytics)

However, it would have to compete with other funds, including Steakhouse Financial, which also sent in its application for the Ethena Reserve Fund. It is proposing an allocation to Steakhouse USDC on Morpho Blue. The fund is overcollateralized with several products, including wrapped BTC and tokenized Treasury Bills products.

Meanwhile, other protocols are also planning to submit their proposals. Mountain Protocol’s founder, Michael Carrica, said his project will send its proposal soon. However, he failed to provide additional information about the plans. Mountain Protocol is the issuer of yield-bearing stablecoin USDM, an ERC20 token offering 5% APY.

DeFi protocols embrace RWA investments

Ethena’s move aligns with the recent trend of DeFi protocols opting for tokenized RWAs as an investment option for their reserves. MakerDAO also announced a similar open bid process a few weeks ago to invest $1 billion DAI into tokenized treasury products. Before that, Arbitrum DAO had invested about 35 million ARB into RWA.

Also Read: Goldman Sachs plans to launch tokenization products by the end of the year

Top 5 Tokenization Projects (Source: Dune Analytics)

All these investments have contributed to massive growth for the tokenized treasuries over the past two years. The asset class recently passed the milestone of $1.8 billion in AUM, a remarkable feat given that it was only $100 million at the start of 2023. Most of the products are on Ethereum, with the network holding a 72.5% market share. Stellar Network has a 21.7% market share.

The asset class is also attracting more interest from crypto-native and traditional institutions, which consider it the bridge between DeFi and TradFi. Many market observers also believe it is the next big thing for the crypto space, with Crypto podcaster Marty Party predicting that RWA on Solana and Ethereum is the next narrative.