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Key Insights:
Abrdn and Archax have partnered with XRP to launch a tokenized fund on XRPL.
The fund is a part of a larger £3.8 billion liquidity fund.
XRP becomes the third blockchain to launch RWA-based tokenized funds after Ethereum and Base.
In recent weeks, BlackRock, Citi, Fidelity, and UBS have entered the tokenized fund market.
Ripple has partnered with Archax and UK-based fund manager Abrdn to launch the first on-chain tokenized money market fund on the XRP Ledger, XRP's own blockchain.
Additionally, Ripple is in the process of launching RLUSD, a stablecoin on the XRP Ledger that is launched primarily to help such RWAs become more liquid.
According to a press release issued by the trio, the on-chain tokenized fund is part of a £3.8 billion USD-denominated money market fund (code: LUX) by Abrdn. The fund is already approved by the FCA which will ensure minimal regulatory friction upon launch. Further, as per the press release, XRP will tokenized $5 million of the fund, which could later increase based on demand.
These funds help customers enjoy the benefits of a higher yield rate than traditional money market funds while helping issuers tap into the high liquidity currently prevalent in Web3 markets. McKinsey expects the tokenized funds market to reach a total value of $1.6 trillion by 2030.
An on-chain tokenized fund issues fiat-denominated tokens similar to stablecoins but with rewards ingrained in them. For example, if you buy 100 USD-based units of a tokenized fund (with 4% APY) and hold them for one year, then at the end of the year, your wallet will contain 104 units (of 1 USD each), or the value of each unit will rise by 4%, i.e., to $1.04.
On-chain tokenized funds have been highly popular among global financial giants like BlackRock, JP Morgan, Fidelity, UBS, and many others, many of whom have already launched their tokenized funds. BlackRock's BUIDL fund and UBS's uMINT fund are examples of such USD-denominated funds.
Interestingly, several regulators have also taken a deep interest in these assets, and the Monetary Authority of Singapore has emerged as a prominent player.
Tokenized funds are similar to traditional money market mutual funds, but issued on a blockchain. This means that, as opposed to traditional mutual funds units where you have to lock in your money and redeem it to use the funds, here you will receive tokens directly in your account or wallet. These tokens would either increase in value based on their APY rate or multiply with a pre-set yield rate (say 4%).
The benefit of such funds is that you have full ownership of these tokens, which enables you to trade them, use them as collateral, or stake them against some liquidity pool to gain more returns.
For the issuers, these funds will help them tap into Web3's rich liquidity and could also increase their subscription rates (due to the above-mentioned benefits).
These tokenized funds may look similar to stablecoins but they are technically a lot different than each other.
Stablecoins do not give you returns for holding them, but tokenized funds do. You can swap a stablecoin with any other crypto in a DEX, but tokenized funds cannot be swapped; they can only be sent from one wallet to another.
These features make them much similar to reward tokens such as Binance's BFUSD or liquidity provider tokens like Lido's stETH.
Currently, there are only four major consortiums that have either launched or are close to launching tokenized funds. These include BlackRock (BUIDL), Fidelity-Citibank(name TBD), MAS-UBS (uMINT), and Archax-Abrdn (name TBD).
Note: A consortium is a loose association of two or more companies that go into business, either to launch a product or offer a service. Although their products and services are offered under a single brand name, they are both legally separate companies.
BlackRock's BUIDL is a tokenized fund denominated in USD and is launched on the Base Blockchain.
Citi and Fidelity International have partnered to launch a USD-denominated money market fund on the Ethereum blockchain but have not disclosed a name yet. This fund is under the guidance of the Monetary Authority of Singapore.
UBS has also launched a money market fund called uMINT, a USD-denominated tokenized fund on the Ethereum blockchain. This is also under the guidance of the Monetary Authority of Singapore.
The money market fund launched on the XRP blockchain (XRPL) is expected to provide multiple benefits to XRP's price. First, it is expected to increase liquidity on the XRP blockchain. Second, the price of XRP could see greater demand because of increased utility, as XRP is the gas token for XRPL.
This month XRP has witnessed a price gain of 168% despite recent market corrections. At its peak, the price of XRP was at $1.62 this month.
Taking a look at its daily charts, we see that XRP is currently in a bullish trend and after a minor correction, has formed the bullish pennant chart pattern. This chart pattern could give a breakout by 29 Nov and if it breaks out, it could send XRP towards $2.
XRP Forms Bullish Pennant Pattern on Hourly Charts
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Both the momentum indicators RSI and MACD also support these bullish chart patterns. RSI has been in an uptrend after consolidating near 50 levels, while MACD has given a second-order crossover.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.