Investing in Backed
Nonce Classic is proud to announce our investment in Backed Finance alongside Gnosis, Stake capital, Cyber Fund, Mindset Ventures and more.
The total size of global assets is valued at $900 trillion, approximately 360 times the market cap of cryptocurrencies. Compare the sheer size of such Web2 assets to on-chain assets, the potential for growth is beyond significant. Even with BCG(Boston Consulting Group)’s conservative forecast, the size of tokenized illiquid assets is expected to reach $16 trillion by 2030.
As if to attest to this opportunity, in the bear market of 2023, the interest rate of US Treasury bonds (5.3%) surpassed the interest rates of DeFi stablecoins (around 3%), leading to a surge in demand for tokenized Treasuries. As a result, the Total Value Locked for Real-World Assets (RWA TVL) increased significantly over the year, and by June 2023, the number of RWA token holders had roughly doubled compared to the last.
The advantage of RWAs is that any asset can be supplied on-chain tailored to market conditions and demand, and that too on Defi which is a distinctly different playing field from TradFi. But due to regulatory issues that challenge the adoption of RWAs in permissionless DeFi, only a limited range of products are available. Backed Finance rose to address these limitations of existing RWAs.
Enter Backed
RWAs are classified in various ways depending on their underlying assets and issuance methods. Let’s first examine Backed’s position within the RWA ecosystem.
Underlying assets for RWAs include real estate, insurance, stocks, private credit, collectibles, etc. Backed is focusing on highly liquid treasuries and equities and ETFs to activate RWA transactions.
Looking more closely at treasury-based RWA projects, RWAs can be categorized into two axes: Passive/Re-Ledgered vs Actively Managed, and DeFi/Unregulated vs TradiFi/Regulated. Backed falls into both Passive/Re-Ledgered and TradiFi/Regulated.
The Re-Ledgered method mirrors off-chain assets on-chain, while the Actively Managed method is implemented by appointing a portfolio manager to actively manage the asset portfolio. In the case of Backed’s bTokens, which are Re-Ledgered RWAs, a variety of underlying assets are supported, not limited to just treasuries but potentially any publicly traded security. Furthermore, Backed operates on a flexible infrastructure and regulatory framework that allows new products to be added within weeks, enabling agile adaptation to market conditions.
Moreover, Backed’s focus on composable assets is directly linked to the regulations it adheres to. Backed issues its products out of Jersey and tokenizes them based on the Swiss DLT Bill.
This means that while Backed tokens are only issued directly to onboarded qualified investors, they are fully composable and freely transferable on secondary markets. bTokens can be issued in both permissioned and permissionless forms, facilitating integration with TradFi and DeFi protocols.
Rather than restricting token trading in the name of regulatory issues, Backed addresses regulatory challenges by innovating on the forefront of regulated finance and adhering to advanced regulatory frameworks such as Swiss DLT Bill, a pioneering example of reg-tech innovation.
Backed also collaborates with DeFi entities such as Morpho, Angle, and 21x, and TradiFi entities like PayPal, serving as a bridge connecting DeFi and TradiFi.
Fully backed by Backed
The core of RWA projects lies in robust regulatory and tech structures establishing the link between the token and an underlying real world asset, and protecting investor rights and interests. Backed tokens are tracker certificates tracking the price of an underlying asset and backed 1/1 by that asset. The underlying assets are held in custody by a Swiss custodian bank and a third party Security agent is incharge of protecting investor rights in the case of any default. The products are EU-registered securities, with an approved prospectus. All of Backed’s bTokens are issued by a bankruptcy remote SPV “Backed Assets JE”.
Backed stands on the foundation of three co-founders with exceptional backgrounds in Web3, tech, finance and entrepreneurship. Over the years they have fostered a strong trust relationship with Gnosis, earning significant trust in the space. Gnosis led not only Backed’s seed round but also their Series A round.
Backed’s bToken is being used as collateral for loans on Morpho and as collateral for interest-bearing stablecoins on Angle. We are nothing short of absolutely ecstatic for the potential found in new bToken issuances based on different underlying assets and their applications in DeFi.
About nonce Classic
nonce Classic is a VC/accelerator born out of Seoul’s largest Web3 hacker house. Backed by a strong alliance of builders and angels, nonce Classic lays out a bedrock for founders by providing a strong community of like-minded people
Website: https://nonceclassic.org/main
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Disclaimer: This article is for general information purposes only and is not investment advice or solicitation. You should consult a professional for investment decisions or advice. The information contained herein has been obtained from other sources, but nonce Classic has not independently verified it and makes no warranty as to its accuracy or suitability. This article reflects the author’s opinions and does not necessarily reflect the opinions of others associated with nonce Classic. Opinions are subject to change at any time without notice.
