Original Article Title: "IOSG Weekly Brief | Ethereum RWA Explosion: Regulatory Game Changer and Full Growth Engine #278"

Original Article Author: Sam, IOSG Ventures

TL;DR:

Using the Stablecoin Act as a segue, introducing the recent public attention and discussion on RWA, then diving into RWA data analysis on Ethereum (highlighting zksync). The emergence of Etherealize and its impact on Ethereum. Ethereum's stablecoin issuance and DeFi have always had a strong moat. Combining with the new U.S. policy, can traditional finance and DeFi be organically connected through RWA? As the most trustworthy and decentralized blockchain, we continue to see where Ethereum's strengths lie.

Legislation Catalyst and Market Attention

Against the backdrop of rapid evolution in traditional finance and regulatory environments, the recent passage of the "GENIUS Act" has reignited market interest in RWA. In addition to stablecoins and major legislative progress, the RWA sector has quietly achieved several important milestones: continued strong growth momentum and a series of remarkable breakthroughs—such as Kraken's launch of tokenized stocks and ETFs, Robinhood's proposal to the U.S. Securities and Exchange Commission (SEC) to grant tokenized assets equal status with traditional assets, and Centrifuge's issuance of a $400 million decentralized JTRSY fund on Solana.

With market attention at an all-time high and broader adoption in traditional finance on the horizon, it is crucial to take an in-depth look at the current RWA landscape—especially the position of leading platforms such as Ethereum. RWA on Ethereum has shown astonishing month-over-month growth, consistently maintaining double-digit highs; the 2025 growth rate is accelerating compared to the single-digit months of 2024. Another key factor driving this momentum is "Etherealize" as a catalyst for regulatory development and the Ethereum Foundation listing RWA as a strategic focus. At this critical juncture, this article will delve into the RWA development dynamics on Ethereum and its Layer-2 networks.

RWA Ecosystem Map, IOSG

Data Analysis: Ethereum RWA Growth Landscape

The data clearly shows: Ethereum's RWA value has entered a clear growth cycle. Looking at the trend of Ethereum's non-stablecoin RWA total value, its long-term trajectory is notable—maintaining in the range of 10-20 billion USD for many years until entering a rapid growth phase in April 2024. This growth momentum continued to accelerate in 2025. The core driving force comes from BlackRock's BUIDL Fund, which has now reached a size of 27 billion USD. As shown by the orange trend line, BUIDL has exhibited parabolic growth since March 2025, strongly propelling the overall expansion of the Ethereum RWA ecosystem.

RWA.xyz, IOSG

By asset category breakdown (excluding stablecoins), the market value of real-world assets (RWA) on Ethereum is highly concentrated in two main categories: Sovereign Debt Projects (75.9%) and Commodity Projects (mainly gold, 20.3%), with other categories being minor. In contrast, in the entire crypto market's RWA market value composition, Private Credit has the highest proportion (57.4%), followed by Sovereign Debt Projects (30.9%).

RWA.xyz, IOSG

RWA.xyz, IOSG

Focusing further on Ethereum's top RWA assets, a pie chart clearly reveals BUIDL's dominant position. Looking back a year ago for comparison: at that time, the BUIDL's scale was still comparable to products like PAXG, XAUT, etc., but now it has significantly surpassed them. While the top ten projects remain relatively stable, Sovereign Debt projects have shown significant growth compared to Gold projects, continuously expanding their market share.

RWA.xyz, IOSG

RWA.xyz, IOSG

From a protocol perspective, the current leaders are mainly stablecoin issuers — the top four protocols are Tether, Circle, MakerDAO (Dai stablecoin system), and Ethena in that order. It is worth noting that the total value of the securitization protocol Securitize has significantly surpassed projects such as FDUSD and USDC, jumping to the forefront. Other securitization protocols that have entered the top ten include Ondo and Superstate.

RWA.xyz, IOSG

Focusing on monthly data from early 2024 to date, the growth surge began in April 2024, with an astonishing 26.6% increase that month — contributing a quarter of the total Ethereum RWA increment for that month. This momentum continued for the following three months. Although there was a slight slowdown from August to December 2024, the network still maintained an increment of around $200 million per month (around 5% monthly growth rate, over 60% annualized).

In January 2025, the growth rate surged again, with a 33.2% increase from the previous month. After a brief pullback in February, Ethereum maintained double-digit growth for four consecutive months, with both April and May seeing growth rates surpassing 20% month-on-month.

RWA.xyz, IOSG

BUIDL

As BUIDL rapidly ascends to become the largest project in the Ethereum RWA ecosystem by market cap, a meticulous analysis of its growth trajectory is crucial. A month-over-month growth rate chart reveals that as of March 2025, this metric remained relatively stable, then surged dramatically in March 2025. However, the latest data from May shows that the ultra-fast growth trend has slightly slowed down, but there is still a $210 million increase with a month-on-month growth rate of 8.38%. The development in the coming months is a key observation window — tracking whether the growth rate continues to moderate or maintains an explosive increase.

RWA.xyz, IOSG

The explosive growth of BUIDL is driven by multiple factors. Growth mainly comes from institutional demand, with product competitiveness being a key driver of success: including 24/7 operation, faster settlement speed compared to traditional finance, and high yields under a compliance framework. It is noteworthy that DeFi integration is realizing synergies and unlocking more utility, such as Ethena Labs' USDtb product — 90% of its reserves are supported by BUIDL. At the same time, the awareness of BUIDL as high-quality collateral continues to rise, and the introduction of sBUIDL by Securitize further unlocks DeFi integration scenarios.

The asset distribution of BUIDL shows a high degree of concentration: about 93% is concentrated on the Ethereum mainnet, with other ecosystem chains difficult to reach in scale. At the same time, as the asset management scale continues to expand, BUIDL's monthly dividends have continuously hit new highs, with the March 2025 dividend reaching $4.17 million and soaring to $7.9 million by May.

BUIDL Distribution, screenshot from RWA.xyz

Stablecoins

Given the structural impact the "GENIUS Act" will have on the stablecoin regulatory framework, a systematic review of the Ethereum stablecoin market's development trajectory holds significant forward-looking significance. Since 2024, the total market value of this sector has consistently shown a robust upward trend, although the growth rate compared to other RWA sub-sector areas has been slightly slower, it still maintains a resilient monthly growth pace.

RWA.xyz, IOSG

In small projects (<$5 billion), most projects experienced continuous contraction at the beginning of 2024. However, close to the end of 2024, the market value of most projects continued to rise, with GHO, M, and USDO seeing continuous growth in market value. At the same time, a new batch of stablecoin projects with market values crossing $50 million emerged, making the Ethereum stablecoin ecosystem more diverse, and small-cap projects have continued to thrive since 2025.

In medium-sized projects ($5-50 billion), in 2024, there were only FDUSD and FRAX; BUSD plummeted from $10 billion in January 2024 to less than $5 billion in March due to the termination of issuance. However, in 2025, USD0 and PYUSD both broke through the $5 billion mark, making medium-sized stablecoins more diverse.

In the top stablecoin projects (>$50 billion), USDT and USDC continue to dominate: USDT remained stable at around $400 billion for most of 2024, surged to $700 billion in early December, and then gradually stabilized until its recent slight decline in market value; USDC steadily grew from $22 billion in January 2024 to $38 billion in May 2025. At the beginning of 2025, USDS and USDe both broke through the $50 billion mark, but USDT and USDC still hold a commanding lead in market share.

RWA.xyz, IOSG

USDT and USDC occupy an absolute dominant position, directly impacting the entire stablecoin ecosystem.

The growth in November 2024 is particularly noteworthy: USDT surged by 30.16% month-on-month, while USDC achieved 16.31% growth. Following this spike, there were several months of continuous growth, with USDC showing more steady growth in the subsequent months, all with monthly increases of over 5%. According to the issuers, Tether attributed this to "a collateral wave flowing into exchanges and institutional trading desks to cope with the expected surge in trading volume"; Circle emphasized that "USDC circulation increased by 78% year-on-year... driven not only by user demand but also by market confidence restoration and regulatory rule-making for emerging stablecoins."

However, there has been a recent clear shift in market momentum—over the last four months, on-chain USDT on Ethereum has experienced growth stagnation, and in May 2025, USDC saw a decline for the first time after months of growth. This phenomenon may signal that the market is transitioning to a new cycle stage.

RWA.xyz, IOSG

L2 Ecosystem

In the broader RWA ecosystem landscape, Ethereum maintains absolute dominance with a 59.23% market share (excluding stablecoins); however, it still faces key challenges.

Screenshot from RWA.xyz

Of note, zkSync has surged to second place with a single drive from the Tradable project, while Stellar is entirely reliant on the Franklin D. Roosevelt BENJI Fund (size of $4.559 billion) to hold third place. Although the on-chain RWA data for these two blockchains is impressive, their structural flaws are undeniable: a lack of asset diversity and reliance on a single project.

BENJI's Composition, screenshot from RWA.xyz

Just as zkSync and Stellar have demonstrated ecosystem characteristics, most L2 networks currently face the challenge of insufficient ecosystem diversity—where their RWA market value is highly dependent on a few core projects. For example, in Arbitrum: out of a total market value of $2.56 billion, BENJI contributes $1.119 billion (43.7%), and Spiko holds $93.5 million (36.5%), together monopolizing over 80% of the market value; Polygon also exhibits a similar distribution pattern, with core market value concentrated in the two major projects, Spiko and Mercado Bitcoin.

Spiko's Composition, screenshot from RWA.xyz

Expanding the view to the entire L2 ecosystem, the RWA value and market share of each network show significant differentiation (see the table below). Apart from zkSync, only Polygon and Arbitrum have formed a substantial scale effect, while the rest of the L2 networks are still in the early stages of development. The success of Polygon and Arbitrum is highly dependent on a single driving force, Spiko—contributing approximately one-third of the total RWA value to both networks.

RWA.xyz, IOSG

Looking at the overall RWA market value evolution of Layer-2 networks, their growth cycle is not entirely synchronous with Layer-1: the mid-2024 did not kick off growth in sync. zkSync's onboarding of Tradable projects brought about a market value growth of billions of dollars. But even excluding this impact, the L2 growth trend has been firmly established—since September 2024, L2 networks have consistently maintained double-digit sequential growth rates. In contrast, in the previous stages, RWA expansion always showed sporadic and weak features. In summary, the end of 2024 marked a turning point in the development of L2 ecosystem RWA: entering a robust growth cycle.

RWA.xyz, IOSG

Etherealize: The Ethereum RWA New Engine

As a key driving force behind Ethereum RWA adoption, Etherealize was born out of a deep insight into industry bottlenecks: when protocol innovation fails to effectively translate into real-world applications, institutional participation often stagnates. Therefore, Etherealize systematically bridges the gap between technological breakthroughs and practical implementation through the development of custom tools, the establishment of a strategic partnership network, and active involvement in policy-making.

Currently, Etherealize is primarily advancing Ethereum RWA adoption and application through market education and content dissemination, as well as the provision of data dashboard tools. On one hand, the team has written and published a series of in-depth articles about Etherealize itself and the Ethereum ecosystem, participated in various renowned podcasts and interviews with traditional financial and crypto media, exerting significant influence through dialogues with industry thought leaders. On the other hand, Etherealize actively engages with regulatory bodies, having successfully hosted several workshops and roundtable discussions on digital asset compliance and regulatory topics, continuously proposing constructive solutions on how to standardize and promote the RWA process.

Recently, Etherealize's founder, Vivek Raman, was invited to testify before the U.S. House Financial Services Committee on "U.S. Innovation and the Future of Digital Assets," further expanding Etherealize's important role in regulatory engagement.

Currently, Etherealize has only launched a data dashboard on the product end for market education and promotional purposes. However, the team explains in the roadmap that they will develop an institutional-facing SDK and are currently recruiting founding engineers, making it worthwhile to continue monitoring Etherealize's progress in driving RWA products.

In the upcoming roadmap, the focus for Q2 2025 is to release an institutional-grade SDK that will combine hosted interfaces, compliance processes, and gas optimization modules into one, helping banks and asset management institutions establish a secure and auditable issuance process, significantly reducing the barriers for traditional financial institutions to participate in Ethereum RWA.

Building on this foundation, Q3 will launch an enterprise wallet pilot project based on Noir to ensure privacy protection at an enterprise level, meeting the confidentiality requirements of RWA transactions through a "privacy by default" mechanism.

In Q4, the vision will shift towards the international market: the team plans to establish partnerships with the Singapore Digital Port and the Swiss Crypto Valley Association, focusing on the regulatory environments and market demands in the Asia-Pacific and European regions, conducting localized product feature and compliance integrations.

At the same time, to reduce friction between different Layer-2 networks, the team will take the lead in promoting Rollup standardization and building a unified cross-chain bridge to achieve free asset movement, thereby integrating Real World Assets (RWA) under the Ethereum ecosystem to enhance interoperability.

Lastly, to bridge the gap between traditional financial institutions and blockchain technology, the team will continue to adhere to a 24x7 support mode, providing end-to-end professional services from legal document preparation to smart contract deployment.

Ethereum RWA Strategic Moat

First Mover Advantage

The decision-making process of traditional financial institutions differs from DeFi: regulatory reviews, pilot validations, and proof of concept (PoC) significantly lengthen the deployment cycle. In the early stages of projects, institutions often adopt a cautious strategy and only expand after the pilot results are validated. While Ethereum's leading projects have taken the dominant position, they still experienced explosive growth after nearly a year of accumulation. Ethereum's core advantage lies in its ecosystem's first-mover status—well before the RWA wave emerged, it had already conducted experimental collaborations with several top financial institutions.

Ecosystem Accumulation

In addition to institutional partnerships, RWA ecosystem maturity requires long-term accumulation. Ethereum maintains its leadership position:

Breadth: covering diverse asset issuers and protocol architectures Depth: multiple projects reaching billion-dollar market capitalizations, creating economies of scale

The integration process between traditional finance and DeFi continues to deepen. Most RWA projects choose to deploy on the Ethereum mainnet first, directly leveraging Ethereum's mature decentralized lending, liquidity provision, and derivatives protocols to enhance capital efficiency. Recent examples include Ethena adopting BUIDL as the reserve asset for 90% of the USDtb stablecoin. The "GENIUS Act" that mandates stablecoin reserves to be tilted towards U.S. treasuries is driving the convergence of U.S. treasuries, on-chain treasury products, and stablecoin protocols. Meanwhile, mainstream DeFi protocols are incorporating BUIDL into their core collateral systems.

Ethereum maintains an advantage in RWA liquidity: active addresses, token variety, and liquidity depth are all leading. While Layer-2 ecosystems face uncertainty in collaboration mechanisms, they remain a core scaling path.

Security

Security is the cornerstone of the RWA ecosystem, and the maturity of smart contract technology is key. As RWA project logic becomes more complex, the requirements for smart contracts also increase. In May 2025, the Sui Chain's Cetus protocol was hacked (resulting in a loss of $223 million), exposing the fatal risks of oracle manipulation and contract vulnerabilities. Although $162 million was recovered through on-chain freezes, such passive emergency mechanisms highlight the limitations of risk management. In comparison, Ethereum's core strength lies in its more decentralized architecture, reliable operational history, and thriving developer ecosystem.

Technological Evolution

The Ethereum technology roadmap will accelerate the development of Real World Assets (RWA). First, it will enhance Layer 1 (L1) performance to bridge the core gap with high-performance public blockchains. Second, it will drive L2 interoperability and focus on the application layer to establish a connection between traditional finance and on-chain RWA.

Simultaneously, Ethereum's privacy roadmap will strengthen security standards and privacy protection mechanisms (such as integrating privacy tools into mainstream wallets, simplifying anti-surveillance transaction processes, etc.), providing security for RWA transactions and building an institutional-grade confidential asset system.

《Genius Act》: A Regulatory Double-Edged Sword

The new stablecoin regulatory framework strengthens centralized control while injecting regulatory certainty into the market. Currently, Section 4(6) of the bill does not explicitly allow stablecoin issuers to pay interest to holders, and although the market may foster alternative solutions, this issue remains uncertain. Furthermore, the "Genius Act" requires stablecoin reserves to consist of high-liquidity assets such as a 1:1 ratio of U.S. dollars or U.S. Treasury bonds.

The reserves of the USDC stablecoin are almost entirely allocated to U.S. Treasury bonds, complying with the new regulations. However, other major issuers will need to completely restructure their reserve structures; otherwise, they may be forced to exit the U.S. market. This move will directly impact certain designs such as algorithmic stablecoins and Delta Neutral stablecoins.

By anchoring collateral to U.S. sovereign credit, regulatory agencies have gained stronger intervention capabilities (while simultaneously driving demand for Treasury bonds). However, loopholes in the legislation may lead to new systemic risks—as seen in the historical lessons from the 2000 Commodity Futures Modernization Act (CFMA).

On the bright side, the clearly defined compliance boundaries in the bill may accelerate institutional entry: regulatory certainty that banks and asset management institutions have long sought has been achieved. More large companies and institutions will obtain licenses to issue stablecoins. For example, discussions are ongoing among major U.S. banks regarding a joint crypto stablecoin, or Meta considering the possibility of relaunching a new stablecoin project.

Ethereum's Resilience: Diverse Ecosystem

The resilience of the Ethereum stablecoin ecosystem stems from its diversity. Since early 2025, the market capitalization of several stablecoin issuers has significantly increased, and numerous new stablecoin projects have emerged, encompassing rich design dimensions: diverse collateral structures, yield strategies, governance models, etc. The "GENIUS Act" enforces the Treasury bond 1:1 reserve requirement, imposing compliance pressure on most projects, compelling them to choose: either adjust their reserve structure or temporarily exit the U.S. market.

The resilience of the Ethereum ecosystem sets it apart from public blockchains dominated by a small number of stablecoin/RWA projects, reducing the risk of homogenization that may occur after widespread regulatory acceptance. Its diverse structure creates a natural risk containment mechanism: even if some stablecoins adjust their strategies due to compliance requirements, there are still projects driving innovation and maintaining a decentralized core, preventing them from fully becoming part of the US bond system. However, the future development will also depend on the strategic positioning of the Ethereum Foundation and Etheralize.

Conclusion

The RWA ecosystem of Ethereum has experienced explosive growth in recent months. Among them, BUIDL has been the strongest driving force behind the recent development of this RWA, while a large number of sovereign bond projects have also shown strong growth momentum. Alongside the expansion in scale, sovereign bond projects have increasingly demonstrated a trend of integration with Ethereum's existing DeFi and RWA ecosystems, such as BUIDL as collateral for lending or stablecoin projects.

Ethereum still holds a significant advantage in the RWA field. Whether it is the first-mover time advantage, security, deep-rooted ecosystem accumulation, ambitious technical roadmap updates, or BUIDL's strong leadership, the diversification of Layer2, and deep empowerment of Etherealize, these factors together have built the core barrier for Ethereum in the on-chain wave of traditional finance.

With the promotion of the "Genius Act," USD credit is accelerating its integration into the on-chain world. This has not only brought a larger influx of capital, creating more revenue and growth opportunities, but has also posed a challenge: it has made the underlying support of the Ethereum financial system lean more towards fiat currency (USD), introducing fiat credit risk and potentially turning the on-chain settlement system into an extension of USD hegemony; the on-chain world is no longer an independent parallel financial system. In the background of this explosive growth, there are also hidden concerns, with the core being Ethereum's exploration of its positioning—whether it will support deep integration with the USD system.

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