Has anyone compared Centrifuge Prime vs. FinresPBC from a legal structure / management perspective?
Given the recent acceptance of Centrifuge Prime as Aave DAO’s legal infra structure provider (esp. when it comes to T-bills) and FinresPBC as Frax DAO’s legal infra structure provider (esp. when it comes to T-bills), it would be interesting to make some comparisons.
Its clear to me that the DAOs with the most sophisticated RWA ambitions are inevitably arriving at the same conclusion: there is a need for centralized service providers that can custody / manage RWAs in a legally compliant way and as a fiduciary to the DAO.
I am attempting now to create a comprehensive list of these service providers.
I would love to hear any thoughts people have about this subject / comparisons between different DAO RWA service providers, below VVVVVVVV
I have not done so, but it would be an interesting exercise to compare across various offerings. The skill-set required on the legal side is heavily structured finance oriented.
I think that conclusion is correct - especially as it relates to tokenization of existing digital assets (Treasuries, ETFs, stocks, bonds, and similar (which are already in digital format)). Frankly, a DAO that seeks to bridge into existing real world assets should seek to leverage all of the existing learnings in the TradFi space … thus my comment on structured finance experience.
Given the real world touch-points, there very well may be differences between Europe, the US and others in terms of common “investor protections” when interacting with existing digital assets. For instance, Article 8 of the UCC, adopted by individual US states, is a useful construct when assessing risks and protections associated with “securities” and the role of “securities intermediaries”. As is the Securities Investor Protection Corporation.
Finally, any RWA structure will need to consider tax – especially if there are any touch points in the US. US tax is insanely complex and it is always worth understanding the potential consequences.
This is a particular point of interest for me. Two poignant questions:
How will the jurisdictions that these service providers operate in, enable or restrain a DAO’s access to RWAs?
How integral will these service providers be to the performance of DAO RWA investments?
By taking a brief, non-comprehensive overview of the current service providers, differing operating jurisdictions seems to imply very different abilities for these service providers and their respective DAOs:
Swiss Asset DAO: under Articles of Association and the provisions of Art. 60 et seq. ZGB (Swiss Civil Code).
FinresPBC: US state of Delaware as a public benefit C corporation
Another question is the amount of capital that DAOs control enough in their treasuries to entice institutional-grade borrowers? or is it only enough to entice smaller / SME type borrowers?
According to DeepDAO, DAOs collectively currently only control US$17.6B. DAOs controlled an all time high of US$ during April 2023 at US$28.1B.
A good question. From my experience, it is perhaps less the jurisdiction than the risk tolerance of the particular entity. Of course, I recognize that jurisdictional risk can result in less risk tolerance. But at the same time, unless there is a legal prohibition as opposed to legal uncertainty or legal silence, forward-looking and entrepreneurial service providers will be willing to serve.
“Performance” ==> the asset will perform or not depending on the asset.
But, in terms of information/data reporting and/or exercise of real world rights and remedies … very important.
Frankly, I think the “information/data reporting” function will be easier to solve than the exercise of rights and remedies.
Already, I know of several projects, especially in Africa, where there are Fintech companies collecting granular credit/transactional data and then utilizing APIs to manage and communicate that data to banks, etc.
For the exercise of rights and remedies, that will be a long time coming.
Hard to say. It is perhaps less the amount of capital available than the challenge to interact with a DAO. Large institutional borrowers are sophisticated players that get measured by results. I enjoy the creative and messy debates and democracy of a DAO, but that may not be entirely the most efficient process for a results-oriented organization. Having said that, there are organizations like SocGen and Huntington Valley Bank that executed transactions with the Maker community.
Already, I know of several projects, especially in Africa, where there are Fintech companies collecting granular credit/transactional data and then utilizing APIs to manage and communicate that data to banks, etc.
Tugende’s default on Goldfinch is not exactly helpful to this. We already did something on chromaway. We put our receivable totals from clients and the related repayments to it onchain. But this is interesting for us. We are small fish (currently need $50k), but looking for something like this. Basically we want to tokenize our income to be able to raise working capital by creating radical transparency. As the amount is small and RWA audits and stuff expensive we are trying to figure our options.
I cannot speak to Tugende’s default as I do not have knowledge of this transaction. But I would not use a single default in a continent to paint a broad brush. With that approach, private credit should leave the US.
My only point being that granular transaction data collection and the establishment of digital pipes to communicate that data is the step in the right direction. Granular transaction data, at a minimum, should allow you to spot trends (good or bad) and make more informed and timely decisions on those trends.
This number is heavily inflated because many projects own mostly their own tokens which are so illiquid they can’t really sell them or borrow against them. The amount of stables & ETH in DAOs is probably closer to the low single digit billions.
Agreed, here on information/data reporting which is extremely critical function when there is some level of trust of monitoring the assets > reporting back on chain prior to a credit event.
However, when I referred to “performance” I was highlighting the fact that as more DAOs increasingly make RWA investments, the performance of their treasury & their native token in most cases will be largely dependent on the quality of operations of these service providers.
I agree with this point. However, it seems like the current amount of capital currently held by DAOs is not enough to entice most institutional TradFi borrowers.
So the question becomes: why are we creating all this infra to support peanuts?
Is it in anticipation that DAOs will eventually hold treasuries that are worthwhile to incentivize? Or is
setting up service providers solely a legal experiment perpetuated by players who already have other related business lines (Centrifuge, Frax, etc)
Perhaps, this is a partial explanation for the lack of direct allocation to RWA tokens (e.g. DAO treasury purchases and holds NS-DROP tokens).
Instead, RWA allocations are indirect for DAOs seeking to diversify. Usually a DAO will onboard a new collateral type then create a pool with the RWA tokens serving as collateral from the borrower.
This indirect means of RWA allocation has to this point, made the most sense for decentralized stablecoin providers, who wish to use these RWA collateral to diversify the peg of their stablecoin away from solely crypto-native collateral.