The Crypto Trading Legend’s Next Move Brings US Treasuries to Crypto, With Plans for Corporate Bonds, Too

The banking crisis in March made it more difficult for crypto companies to access conventional banks, raising an obstacle to a mundane but important task for any business: finding a place to park excess cash.

This has created something of a Trojan horse opportunity for a startup with a well-known pedigree to bring cash-like instruments to the cryptocurrency space, and lays the groundwork for the company’s broader ambition to digitize the conventional bond market.

The startup is PV01, whose name is a piece of bond jargon, and it was co-founded by Max Boonen, who also helped get the giant crypto market maker B2C2 off the ground. Its first product: tokenized, chained versions of one-month US Treasury bills. They are among the safest assets in the world, so investors treat them like vanilla fiat money. A tokenized version brings something crypto companies can yearn for after March.

“It’s a cash management product,” Boonen, who used to work as a fixed-income trader at Goldman Sachs in London, said in a recent interview. “It’s not our end game, but it’s in demand.”

He continued: “We are targeting either the crypto firms that find it difficult to move money back and forth [between the crypto space and conventional financial system] — which is the most — and also people who have a lot of wealth in crypto who are simply not able or willing to bring it back into the traditional system, and those are two pretty big segments.”

What is the end game of PV01? Get companies to issue bonds on a blockchain. This initial trial serves as a proof of concept for it; instead of finding a bond issuer, PV01 will simply buy and then tokenize fixed income products issued by arguably the safest issuer in the world: the US government. But companies are the goal in the longer term.

– This goes back two years ago. I thought we should have bonds on a blockchain like we have equity tokens,” Boonen said. B2C2 was the “second largest player in lending after Genesis, and it felt strange to me that private, bilateral deals were driving it.”

And then last year’s credit crunch, fueled in part by the demise of hedge fund Three Arrows Capital (3AC), “was made more severe by the fact that nobody knew who owned what debt and who owed what debt.” On-chain bonds can solve that.

Part of the allure of one-month US bills is that interest rates have risen so much — to about 3.5% — because of the Federal Reserve’s rate hikes. “When rates were 0%, it was easy to do nothing. Put it into stablecoins and wait,” Boonen said. PV01’s tokenized bills mean customers can take advantage of these juicy prices while still technically keeping their money in crypto.

“If you want to buy T-Bills, you need fiat dollars,” he said. “But if you could just use stablecoins [to buy them] you remove one layer of the trade.”

PV01 works with two unspecified brokers to secure the bills, which are then placed in a special purpose vehicle (SPV).

Despite being US-issued debt, PV01 will not immediately operate in the US, where regulation and scrutiny of crypto is becoming stricter. “We’re only going to offer our products broadly in the United States when we have a clear sense that it’s legal to do so based on the setup we’ve put in place,” he said. “And if it’s never possible, we never will.”