Bitwise Debuts PAPY Vault to Deliver Institutional Real-World Asset Yields Onchain

Bitwise Asset Management has launched the Bitwise Premium RWA Vault (PAPY), a new onchain lending strategy targeting 5–6% variable APY. By accepting AUSD stablecoin deposits and lending against real-world asset (RWA) collateral, the vault provides fintech professionals with a yield source that is decoupled from volatile crypto-native liquidity cycles.

What was announced

The PAPY vault operates on the Morpho protocol, serving as a curated lending environment where users deposit AUSD, the stablecoin issued by Agora. These deposits are subsequently lent to borrowers who provide white-listed real-world asset collateral and pay an interest rate derived algorithmically. Bitwise acts as the specialist curator for the vault, predetermining its operational parameters—such as acceptable collateral types, loan-to-value ratios, and interest-rate configurations—and precalibrating its risk models. Crucially, Bitwise performs these functions without taking direct custody of or exercising discretionary management over the user assets.

The vault features a diversified set of RWA markets at launch, designed to offer yields less correlated with crypto market volatility. This includes Huma Finance’s PST, which focuses on short-duration cross-border payment financing. These loans are extended to licensed financial institutions on terms ranging from one to seven days. This specific market has processed $17 billion in transaction volume with zero historical defaults. Additionally, the vault utilizes USDai, comprising loans backed by GPUs that power AI infrastructure. This collateral is held in a bankruptcy-remote special purpose vehicle (SPV) with a first-priority lien, is independently monitored, and features self-liquidating loans. The value of this collateral is warranted and reinsured via a subsidiary of Munich Re.

The third featured market is Hastra PRIME, a tokenized claim on a warehouse lending facility collateralized by prime home equity. These loans operate on rolling one-hour terms and feature the automatic substitution of any non-performing loans. The deposit asset, AUSD, is fully collateralized by U.S. Treasury bills, overnight and reverse repo, and other liquid assets. Its reserves are managed by VanEck and held at State Street.

"We believe a diverse basket of collateral gives users a better risk-adjusted lending experience, but that only works with a specialist curator,"

Jonathan Man, Portfolio Manager at Bitwise.

The companies involved

Bitwise Asset Management is a global crypto asset manager currently overseeing $9 billion in client assets. The firm has established a significant presence in traditional finance through exchange-traded funds (ETFs) and is now expanding its footprint in onchain markets through staking, tokenized portfolios, and vault curation. The PAPY vault is hosted on Morpho, a decentralized lending protocol where Paul Frambot serves as CEO and Co-founder. Morpho provides the programmatic lending infrastructure that allows for the transparent execution of Bitwise's curated strategies.

The ecosystem supporting the vault includes several key institutional players. Agora, led by CEO and Co-Founder Nick van Eck, provides the AUSD stablecoin. The management of AUSD’s underlying reserves involves VanEck, a global investment manager known for its focus on both traditional and digital assets, and State Street, which serves as the custodian for the liquid assets backing the stablecoin. On the collateral side, H-finance (operating as Huma Finance) provides the payment financing technology. Hastra provides the home equity-backed PRIME token, having developed its protocol in partnership with Figure, a fintech firm specializing in blockchain-based home equity lines of credit. Furthermore, the AI infrastructure loans (USDai) are supported by Munich Re, a major global reinsurance provider, through one of its subsidiaries which warrants and reinsures the collateral value.

What this means

The launch of PAPY signals a shift in the onchain yield landscape, moving away from crowded models like bitcoin-backed lending and toward deeper traditional credit markets. By tapping into home equity and cross-border payments, Bitwise is attempting to solve the problem of yield durability that plagues crypto-native markets during bearish cycles. This move puts pressure on pure-play DeFi lending protocols that lack institutional-grade RWA integration. However, the success of such vaults will depend on the reliability of the underlying RWA oracles and the ability of curators to manage liquidity risks in assets that are inherently less liquid than crypto tokens.