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PRIME Bitwise Asset Management launched the PAPY Real World Asset Lending Vault on Morpho on September 2. According to the company announcement, users deposit AUSD stablecoins issued by Agora, while the treasury provides loans to approved tokenized collateral. Bitwise aims to provide a floating annualized rate of return of 5% to 6%, but said this estimate will vary based on borrower demand and agreement utilization.
PAPY adopts white list tokenized collateral
Borrowers must submit assets from a predetermined collateral list. The initial list includes PST, sUSDai, and PRIME, which allows depositors access to multiple real-world credit structures rather than a single native cryptocurrency collateral type. Bitwise said loans were overcollateralized and interest rates were determined by algorithms.
Bitwise's responsibility is to set treasury parameters, including eligible collateral, loan-to-value ratios, and interest rate allocation. The company said it does not keep deposits and does not make discretionary decisions about individual user assets. Deposits remain in user-controlled wallets and Morpho smart contracts.
AUSD as a deposit asset in the treasury
PAPY only accepts AUSD at launch. Bitwise describes the stablecoin as backed by U.S. Treasury bonds, overnight and reverse repo agreements, and other liquid assets, with reserves managed by VanEck and custody provided by State Street Bank. Agora has also expanded the liquidity of AUSD through Keyrock, providing context for its use in on-chain credit products.
Bitwise adds selected Morpho strategies
This release places traditional asset management companies at the treasury selection level rather than at the custody level. Bitwise Investment Manager has been registered with the U.S. Securities and Exchange Commission to engage in independent consulting business, but the announcement states that the registration does not cover PAPY users and the SEC has not approved the vault.
Morpho is increasingly used in select institutional-level stablecoin strategies. PAPY extends the model to a basket of tokenized credit collateral, while retaining lending and repayment rules within the agreement.
Floating yields accompany DeFi and credit risk
The 5%-6% target is not a fixed return or guarantee. Bitwise said the actual yield could be higher, lower or even zero. Its disclosures list risks such as smart contract failures, oracle problems, collateral clearing gaps, stablecoins unanchored, RWA issuers default, and regulatory changes, including possible total loss of principal. This makes the launch a new on-chain credit route rather than a risk-free alternative to treasury bonds.
