New Protocol Tackles Redemption Delays in $20 Billion Tokenized Market

Uniform Labs, a blockchain infrastructure firm founded by experienced former Standard Chartered professionals, has implemented a new protocol, Multiliquid, aimed at resolving liquidity challenges in the rapidly growing tokenized market. The protocol allows for round-the-clock conversions between tokenized money market funds and popular stablecoins such as USDC and USDt.

Key Takeaways

Uniform Labs has launched a protocol named Multiliquid to improve liquidity in the tokenized market.
Multiliquid enables continuous conversions between tokenized money market funds and major stablecoins.
The tokenized market is valued at approximately $20 billion, with growth primarily in tokenized Treasury products.
The Multiliquid protocol responds to regulatory changes established by the GENIUS Act in the U.S.
Tokenized money market funds face liquidity risks, emphasized by the BIS, particularly regarding traditional redemption processes.

New protocol targets redemption delays in $20B tokenized market

Introduction to Uniform Labs’ Multiliquid Protocol

On Wednesday, Uniform Labs introduced its innovative protocol, Multiliquid, which aims to tackle ongoing liquidity issues in the emerging tokenization market. This protocol enables seamless conversions, 24/7, between tokenized money market funds and leading stablecoins such as USDC and USDt.

As part of its initial offerings, Multiliquid integrates with tokenized Treasury assets provided by Wellington Management and other financial managers. This integration will allow institutional stakeholders to achieve immediate liquidity instead of having to depend on redemption periods controlled by issuers.

The introduction of Multiliquid comes at a time when tokenized real-world assets (RWAs) are on the rise, with the current market estimated at around $20 billion. While this value has dipped from a previous peak of over $30 billion earlier in the year, the sector has continued to show steady growth, especially in tokenized Treasury products.

Market Size of Total RWAs

Total RWA market size, excluding stablecoins. Source: RWA.xyz

Uniform Labs explained that the development of this protocol was in direct response to the GENIUS Act—a recent U.S. regulation that sets a framework for payment stablecoins while restricting issuers from offering yield payments to holders. In light of this legislation, Multiliquid is positioned to maintain stablecoins as straightforward payment tools while enabling yield generation through regulated tokenized money market funds and RWAs linked via its swap layer.

Addressing Liquidity Risks in the Tokenized Money Market Sector

Tokenized money market funds are emerging as one of the quickest expanding sectors in the realm of RWAs, joining private credit and tokenized U.S. Treasury bonds. Nevertheless, their rapid development has revealed a consistent vulnerability: traditional redemption methods can impose liquidity constraints, affecting their functionality in the continuously-operating on-chain markets.

This concern was highlighted by the Bank for International Settlements (BIS), which reported a remarkable increase in the assets of tokenized money market funds—from $770 million to almost $9 billion within just two years. However, the BIS cautioned that the sector is subject to significant liquidity risks.

As tokenized funds continue to be utilized as collateral in cryptocurrency markets, the BIS warned that if the demand for redemptions on-chain surpasses the available off-chain liquidity—especially during market downturns—it could lead to operational and liquidity challenges.

Tokenized Funds as Collateral

Source: Fintech.TV

According to JPMorgan strategist Teresa Ho, the increasing acceptance of tokenized funds by various financial institutions as a type of “cash as an asset” might eventually offset the growth of stablecoins.

The Multiliquid protocol represents a significant step forward in enhancing liquidity within the tokenized market, offering institutional players the tools they need to navigate this evolving financial landscape efficiently.