Decentralized finance pioneers announce a mutual fund
Robert Leshner, the creator of decentralized finance's standard-bearing lending application, Compound, has moved on from the startup to launch a very boring mutual fund.
- Very boring, that is, with a hint of blockchain.
Why it matters: If his new product is approved, it would give the crypto rich and blockchain native funds a way to access the strong returns on government debt right now without changing their approach to portfolio management.
Details: Leshner, and other former colleagues from Compound Labs, have filed to launch Superstate Trust, which would steward a new mutual fund — pending regulatory approval — called the Superstate Short-Term Government Bond Fund.
- Superstate has raised $4 million in seed money from leading investors in decentralized finance, or DeFi, including ParaFi Capital, 1kx, Cumberland Ventures and Distributed Global, and has filed a prospectus for the bond fund with the U.S. Securities and Exchange Commission.
In the weeds: The fund would buy short-term government debt and allow users to track that debt as a token on different blockchains, starting with Ethereum.
- Leshner tells Axios that this initial version of the product won't have any of the typical bells and whistles of DeFi. All it will be good for is holding a share in the fund.
- Every person who does hold it will have to be whitelisted — approved to own the asset — and Superstate isn't going to whitelist smart contracts, like Uniswap or Compound, so it won't be useable by such applications.
- Shares can be held on chain but they also can just be held in a brokerage fund, like any other mutual fund.
What they're saying: "The benefit is that if you're a crypto native firm that only deals with crypto native infrastructure, you'll be able to hold this alongside your other investments," Leshner tells Axios.
- Customers will get access to yields on U.S. debt (which are solidly beating yields in DeFi right now).
What we're watching: Boring is kind of the point of the first fund, but if it's approved — and government regulators become comfortable with this approach, one could imagine that the future could open new use cases for real-world assets tracked on a blockchain in a regulated instrument.
- It could be particularly potent if one day there are regulated exchanges trading multiple blockchain assets.
Catch up fast: The team behind Superstate is basically looking to give DeFi investors an easy way to get access to real-world yield. Previously, it had been running Compound Treasury, a bid to give normal investors access to DeFi yields.
- Compound Labs has continued under new leadership, but it wound down the Treasury product with this team's departure.
- "The market for Treasury basically changed following the implosion of Celsius and Genesis and FTX," Leshner said.
Where it stands: Superstate is waiting for a green light, which might not come. If it does, it's likely to take several months.