Crypto and the real world get married and procreate — the happy arrival of baby RWA

There is a hot corner of the usually very public world of crypto in which innovation is quietly crackling and popping, with hundreds of millions of dollars already moving to and fro on a near-daily basis.

It is not sexy. There is no crime or hacking to speak of. There are no big personalities grandstanding from TV and Twitter feeds. And the old guard has come out to play — the commercial banks, the investment banks, large and stolid global corporations.  

It is not only where the action is, but it is also going to be the fuel that catapults blockchain and stablecoins into the mainstream, far from the madding crowds clustered around the noisy cryptocurrency markets.

Unfortunately though, it has acquired a most uninspiring nickname in the world of crypto, dull enough to glaze the most attentive of eyes.

It is called RWA, short for “real-world assets”. And it simply refers to the application of crypto technologies to stuff in the real world, particularly in finance.

Here is what is going on:

Somewhere behind the stern facades of all financial institutions is a well-worn set of machinery that provides financial services, usually in the form of loans, to enable the building, manufacturing, moving, distributing, beneficiation, buying, selling and trading of all the stuff that we as citizens end up consuming and using.

The money required for a shipment of cars from China to Australia. The loan to cover the gap between the sending of a large invoice and the payment and settlement of that invoice. The loan to build an Italian manufacturing plant in Vietnam. 

It is this grindy, gnarly, complex set of cogs and wheels that makes commerce chunk away without most people noticing. Until something doesn’t arrive on our doorstep, or on the shelf at our local shop, or in the medicine storage facility at the hospital where our child is awaiting a critical procedure. Then we notice. Loudly and pissed-offedly.

The machine that makes this all happen is attended by many actors, stakeholders and bit players — producers, shippers, distributors, retailers, customs officials, lawyers, brokers, handlers, fixers, regulators, port authorities and, of course, capital providers whose money greases the many wheels along the way.

These many actors strut their stuff and then look to get paid for their labour. So that fuel ends up in the aircraft we are flying or the chicken drumstick ends up in our stomachs. If one looks under the hood, there are often 10, 20, 30 and even more players along the chain of events, sometimes acting in sequence and sometimes in parallel.

Creating a virtuous circle