Stablecoins + RWAs: hybrids and composability
- Christian Amezcua
- Oct 29
- 10 min read
1) Executive snapshot (Q4-2025)
Stablecoin float: ~$308.5B total market cap, with USDT ~59% share. Growth ~4% over the last 30 days. (DeFi Llama)
Real usage/settlement: Adjusted on-chain stablecoin settlement runs in the $20–26T per year range, per Artemis’ 2025 report (noise-adjusted methodology). (Castle Island Ventures)
Tokenized Treasuries on-chain (cash-equivalents): $8.64B TVL, 52 distinct products, 56.6k holders. (RWA.xyz)
Flagship RWA funds: BlackRock BUIDL ≈ $2.85B AUM; Franklin BENJI ≈ $0.85B AUM. (RWA.xyz)
Why hybrids matter: fiat-linked stability + T-bill yield inside programmable rails → collateral for DeFi, 24/7 treasury ops, faster payables/settlement at internet scale. (See §5 for composability pathways.)
2) Definitions & taxonomy
Stablecoins (cash-like tokens):
Fiat-reserve / EMTs (e.g., USDT, USDC, PYUSD): off-chain cash & short-term U.S. Treasuries held by regulated entities; on-chain tokens represent a redeemable claim. (DeFi Llama)
Asset-referenced tokens (ARTs): baskets referencing fiat/commodities (EU MiCA term). (CoinDesk)
Crypto-collateralized: over-collateralized with on-chain assets (e.g., DAI’s crypto leg; RWA legs covered in §4).
Algorithmic/endogenous: generally excluded or restricted under emerging regimes. (See §8.)
RWAs now tokenized on public chains:
3) Market landscape (who & how big)
Issuers & sizes (selected):
USDT (Tether): ~59% of all stablecoins by market cap (implies ≈$183B). Live circulation published on Tether’s transparency page; aggregate share via DeFiLlama. (DeFi Llama)
USDC (Circle): $76.4B in circulation (Oct 23, 2025), backed by ~$76.7B reserves. (Circle)
PYUSD (PayPal/Paxos): circulation recently ~$2.6–2.8B per venue dashboards; Paxos posts monthly reserve attestations. (Kraken)
Chains & throughput:
Where value moves: Artemis estimates $20–26T annualized stablecoin settlement across chains after removing known noise. (Castle Island Ventures)
Solana’s footprint: stablecoins on Solana show ~$15B outstanding with USDC dominance; chain-level stablecoin pages track composition and growth. (DeFi Llama)
Supply by chain (broad picture): The Block’s tracker (sourced from DeFiLlama) breaks out stablecoin supply per chain and is updated through Oct 24, 2025. (The Block)
Tokenized T-bill/MMF leaders (AUM):
4) Architectures of “hybrid” stable–RWA designs
A. Yield-bearing “dollars” via tokenized fund shares
Model: fund shares are issued as tokens that maintain a $1 NAV on-chain while interest accrues to holders (economically similar to a money-market fund). BlackRock’s BUIDL launched in Mar-2024 on Ethereum with Securitize; it’s permissioned to qualified purchasers and invests in cash, T-bills, and repos. (The Wall Street Journal)
Scale signal: BUIDL crossed $1B AUM by Mar-2025 and is now reported near $2.9B (Q4-2025). (PR Newswire)
B. Cash-like, yield-passing tokens (note wrappers)
Model: token represents a short-duration note secured by T-bills/bank deposits; coupon/yield is passed through on-chain with stablecoin-like UX. Ondo’s USDY is issued as a tokenized note; it’s offered outside the U.S. (and not to U.S. persons) and is designed for DeFi composability. (Ondo Finance)
C. Over-collateralized stablecoins with RWA vaults
Model: a crypto-native stablecoin (e.g., DAI) adds RWA exposures (T-bills/MMFs/credit) to its collateral set and revenue mix. Maker’s integration of RWA collateral and associated income is documented across research and forum reports. (Galaxy)
D. Permissioning & token standards for compliance
How the “security leg” works: most RWA tokens are permissioned ERC-20s with on-chain transfer checks (whitelists/eligibility). Common stacks include ERC-3643 (T-REX) and Securitize’s DS Protocol to enforce KYC/transfer rules at the token level. (erc3643.org)
E. Custody & mint/redeem rails
Institutional wrappers (e.g., OUSG) typically support 24/7 mint/redeem against stablecoins with underlying assets held by qualified custodians/administrators. (Ondo Finance)
5) Composability pathways (what hybrids plug into)
1) DeFi collateralization & credit
Flux Finance accepts OUSG (tokenized short-term U.S. gov exposure) as the collateral type to borrow/lend stablecoins—an archetype for RWA-backed DeFi credit. Live markets and docs emphasize OUSG-only collateral. (Flux Finance)
RWA collateral also underpins protocol treasuries/DAOs seeking low-volatility yield while retaining on-chain mobility. (See §6 Ondo/OUSG.) (RWA.xyz)
2) Payments & settlement rails
Visa expanded USDC settlement, first adding Solana alongside Ethereum (2023), then broadening support in July 2025 (more USD-backed stablecoins, blockchains, and EURC). This is a concrete bridge from corporate payment flows to stablecoin infrastructure. (Visa)
3) Treasury operations (24/7 liquidity vs banking hours)
Institutional “cash equivalents” like OUSG advertise 24/7 mint/redeem with stablecoin legs, enabling intraday portfolio moves, collateral rotations, and automated rebalancing—functions impossible with legacy cutoff windows. (Ondo Finance)
4) On-chain MMFs in DeFi
Franklin BENJI (FOBXX): tokenized government money-market fund with multi-chain distribution and growing AUM; recent updates highlight on-chain utility (e.g., intraday yield display and chain split). (Franklin Templeton Digital Assets)
6) Case studies (data-forward)
Case 1 — BlackRock BUIDL (Securitize)
What it is: tokenized USD institutional digital liquidity fund on Ethereum; $1 token accrues interest on-chain; minimums and investor eligibility apply. (The Wall Street Journal)
Trajectory: surpassed $1B AUM by Mar-2025; recent reporting places it near $2.9B amid broad tokenization growth and Securitize’s impending public listing via SPAC. (PR Newswire)
Design notes: permissioned transfer (KYC/eligibility), qualified custodians, and issuer-level controls (see standards in §4D). (Medium)
Case 2 — Franklin OnChain U.S. Government Money Fund (BENJI/FOBXX)
What it is: a Rule 2a-7 government MMF recorded on public chains; BENJI token maps 1:1 to FOBXX shares. Prospectus and fund page spell out the 99.5% government/cash/repo mandate. (SEC)
Scale & distribution: official page shows $718M net assets as of Sept 30, 2025; third-party trackers show ~$0.85B and multi-chain footprint (e.g., Stellar share). Together they illustrate rapid 2025 growth and on-chain distribution. (Franklin Templeton)
Case 3 — Ondo (USDY + OUSG) and Flux
USDY: tokenized note secured by T-bills/bank deposits; offered outside the U.S.; designed for yield-bearing stablecoin UX and DeFi use. Recent integrations (e.g., as primary collateral for stablecoin mints) show emergent “yield-dollar” roles. (Ondo Finance)
OUSG: tokenized short-term U.S. government exposure with 24/7 mint/redeem; accepted as sole collateral at Flux for borrowing stablecoins—an operational example of RWA-to-DeFi credit pipes. Live asset analytics are tracked publicly. (Ondo Finance)
7) Risk, design trade-offs, and resilience
A. Reserve & asset-quality risk
Even stablecoins backed by off-chain assets face liquidity mismatches: if holders redeem en masse and the backup assets are long-dated or illiquid, the peg can break.
On the RWA side: tokenized assets (treasuries, MMFs, private credit) bring additional credit/liquidity risk. For example, tokenized private credit (~US$ 12-16 billion as of August 2025) is now over 50 % of the RWA category. (markets.businessinsider.com)
Liquidity remains a major bottleneck: even though >US$21 billion of RWAs are on-chain, many suffer low active trading/secondary liquidity, raising concerns in a stress scenario. (arXiv)
B. Smart-contract & protocol risk
When stablecoins or RWA tokens live on-chain, they inherit risks related to oracle failure, settlement bugs, composability cascades (one protocol failure triggers others), and contract change-risk.
The more “lego-like” the architecture (i.e., mixing stablecoin + RWA + DeFi lending/borrowing), the greater the systemic interconnectedness and potential for spill-over. Academic literature maps “crosstagion” risk between TradFi & DeFi. (arXiv)
C. Market structure & concentration risk
A handful of large issuers and chains dominate stablecoin and tokenized RWA issuance; if any major issuer fails or is subject to regulatory action, knock-on effects could be severe.
Cross-chain bridges and composable protocols amplify risk: outages, exploits or regulatory enforcement can disrupt multiple chains swiftly.
D. Regulatory & structural trade-offs
Permissioned designs (whitelists, KYC) increase compliance but reduce decentralization, liquidity and composability.
Open designs increase access and composability but raise AML/KYC/regulation risks.
The trade-off: how much “banking logic” do you impose on a tokenized asset while still retaining on-chain efficiency and composability?
E. Resilience & mitigation best practices
Transparent reserve attestations, high-quality liquid backup assets (e.g., short-duration Treasuries, top-tier MMFs)
Robust redemption mechanisms: clear paths to off-chain settlement when the on-chain rails are stressed
Diversified collateral/counterparty exposures; layered security (protocol + issuer + custody + legal)
Auditability & investor protections: periodic audits, clear legal rights of token-holders in the event of insolvency
Limiting excessive leverage. When RWA tokens are used as collateral in DeFi, prudent LTVs, margin buffers and fallback protocols reduce risk.
8) Regulation: where policy is landing (2024-2025)
United States
The GENIUS Act was passed in July 2025, creating a federal licensing framework for “payment stablecoins” in the U.S., setting rules for custody, reserves and issuer eligibility. (Sidley Austin)
Under this Act, foreign issuers seeking U.S. access must meet comparable regulatory regimes, register with federal regulators or work through U.S. entities. (Paul Hastings)
Result: U.S. stablecoin + tokenised asset issuance is now operating in a regulated lane; banks and fintechs are increasingly stepping in. (FinTech Weekly - Home Page)
European Union
The Markets in Crypto‑Assets Regulation (MiCA) entered into force for e-money tokens and asset-referenced tokens on 30 June 2024. (Wikipedia)
Under MiCA, stablecoin issuers must maintain segregated reserves, governance, redemption options and robust disclosures. Non-EU issuers targeting EU users may face equivalence and registration requirements. (Owl Explains)
United Kingdom
The UK’s Financial Conduct Authority (FCA) consulted (CP 25/14) on stablecoin issuance and custody in 2025; draft rules propose minimum capital, direct redemption rights, and strict segregation of reserves. (CoinGeek)
The UK is still working on full implementation; proposals including caps on individual holdings are under discussion. (Arnold & Porter)
Others & Global
Hong Kong passed a Stablecoin Ordinance in May 2025 requiring issuers to be licensed by the Hong Kong Monetary Authority and backed by high-quality liquid assets. (World Economic Forum)
International regulatory bodies (e.g., Financial Stability Board) are also focusing on stablecoin/RWA risks because of cross-border & systemic implications.
Implications for stablecoin-RWA hybrids
Issuers of RWA-backed tokens must now factor in securities laws, custody regulation and cross-border reserve treatment (not just crypto-token regulatory risk).
Permissioned design (e.g., KYC, accredited investors) may become more common to satisfy regulation.
Chains/issuers must evaluate which jurisdictions they target and what regime applies (e.g., U.S. payment-stablecoin vs EU ART vs UK consultation state).
The regulatory lens is shifting from “crypto novelty” to "financial infrastructure" — meaning stablecoin + RWA hybrids may come under the same scrutiny as banks, MMFs or money-market funds.
9) Data: adoption metrics to watch
A. Float and velocity
Market cap of stablecoins: how much outstanding supply exists by issuer, by chain. Example: as of Sept/Oct 2025, estimates place stablecoin circulation at ~US$280 billion. (The Cryptonomist)
On-chain transfer volumes: total value transferred by stablecoins across chains (gives sense of settlement/usage scale). Reports estimate annualised flows >US$20 trillion.
Chain distribution: share by chain (Ethereum, Solana, etc) and how flows migrate across chains.
B. RWA penetration & composition
C. Issuer transparency & risk metrics
Reserve composition & audit status: for stablecoins, ratio of cash/T-bills/other assets; frequency of attestation.
Redemption/default history / stress events: track any stablecoin peg breaks, RWA token issues or liquidity squeezes.
Collateral usage in DeFi: amount of RWA-tokens accepted as collateral, LTV ratios, borrowed volumes.
D. Composability / DeFi integration metrics
Collateral TVL: how much of stablecoins + RWA tokens are being used as collateral in lending/borrowing protocols.
Protocol count & chain spread: number of DeFi protocols integrating RWA tokens, number of chains supporting them.
Secondary market/trading volumes: for tokenised RWA, what’s the turnover, how many active wallets, how much trading depth. (Papers highlight liquidity remains thin.) (arXiv)
E. Growth trajectories & forecasting
Annual growth rates: e.g., RWA tokenization grew ~245× from 2020 to 2025, … (rwa.io)
Future potential: forecasts suggesting tokenised RWA could reach US$10 trillion-30 trillion by 2030. (rwa.io)
Stablecoin growth potential: large institutions/banks entering the space, supported by regulatory clarity. (FinTech Weekly - Home Page)
10) Hybrid design playbook (for builders & treasurers)
A. Choose your wrapper wisely
Tokenized fund shares (BUIDL/BENJI model)
Best for regulated investors seeking direct exposure to fund yield.
Backed by 100 % short-term Treasuries / repos.
Requires transfer-restriction logic (ERC-3643 / DS Protocol) to meet securities and KYC rules.
Cash-like note wrappers (USDY / OUSG model)
Provide stablecoin-like UX (1 token ≈ $1) with yield accrual off-chain.
Better suited for DeFi integration where composability is key.
Investors must understand legal separation: you own a note, not fund shares.
B. Permissionless vs permissioned trade-offs
Hybrid systems often use dual-layer tokens: permissioned base (fund share) with permissionless wrapped representation (e.g., a claim token), bridged by authorized agents.
C. Composability checklist
Collateral eligibility: Is the token accepted by lending protocols or stablecoin issuers (Maker, Flux, etc.)?
Oracle coverage: Does a reliable price feed exist (Chainlink, Pyth, UMA)?
Liquidity venues: On-chain AMM pools, permissioned DEXs, or OTC redemption only?
Cross-chain mobility: Does the issuer support native deployment on multiple L1/L2 chains or rely on wrapped bridges?
Legal clarity: Are holders entitled to underlying cash / assets in bankruptcy?
D. Operational rails
Mint/redeem windows: 24 / 7 blockchain operations vs limited fund hours.
Settlement rails: USDC, USDT, or fiat bank wires for primary transactions.
Custody: Qualified custodians (e.g., BNY Mellon, Anchorage) for fund assets; multisig or smart-contract custodians for on-chain tokens.
Reporting cadence: monthly reserve attestations or daily NAV updates; MiCA will require public disclosures and daily aggregate reports by 2026 EU-wide.
E. Governance & data reporting
Maintain real-time dashboards (e.g., Dune / RWA.xyz) showing:
AUM by product and chain
Redemption / mint activity
Yield distribution and duration profile
Implement independent audits and integrate Chainlink Proof-of-Reserve or equivalent.
11) Macro & outlook
A. Stablecoins as a new dollar rail
J.P. Morgan estimates stablecoins could generate US $1.4 trillion of incremental demand for dollar assets by 2027 if adoption tracks current trajectory.
Stablecoins are evolving from crypto plumbing to dollar infrastructure: by 2025, monthly settlement volume exceeds Visa + Mastercard combined on several chains.
Regulatory clarity (U.S. GENIUS Act, MiCA) now opens the door for banks / fintechs to issue compliant stablecoins at scale.
B. RWA tokenization growth path
Tokenized Treasuries and MMFs ≈ US $8.6 billion TVL, up 20× from early 2023.
Broader RWA market (including private credit, funds, and commodities) exceeds US $25 billion on-chain (2025 Q3).
Institutional adoption is accelerating: Citi, JPM Onyx, and HSBC are piloting tokenized deposit and MMF platforms for institutional clients.
Tokenized private-credit pools (e.g., Centrifuge, Maple) now originate hundreds of millions monthly, signaling that DeFi-TradFi bridges are here to stay.
C. Competitive landscape & consolidation
USDT still commands the retail/EM remittance market.
USDC + PYUSD target compliant fintech rails.
RWA-linked stablecoins (USDY, OUSG, BUIDL) focus on institutional yield.
Expect consolidation: mid-tier issuers will likely partner with banks or convert into regulated payment institutions.
D. Forecast: 2025 → 2030
(Sources: Artemis, RWA.xyz, J.P. Morgan Onyx 2025 Tokenization Outlook)
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