At this current governance stage, we aim to clarify the evaluation criteria that will guide our assessment of tokenized securities and similar Real World Asset (RWA) products. During our standardized asset review methodology, we’ll put additional efforts into identifying risks specific to RWA offerings.
When conducting an asset review, we will direct additional attention toward the following key areas:
- Assets Under Management (AUM): An assessment of the value of assets under management.
- Product Longevity: An evaluation of the product’s maturity, which indicates the stability and reliability of the offering over time.
- Legal and Regulatory Standing: An assessment of the product’s legal and regulatory framework, focusing on the jurisdiction of incorporation, compliance with relevant regulations, and the extent to which the product offers bankruptcy protection. These aspects will help gauge the security and viability of the centralized components.
- Credible Decentralization: We will also seek reasonable assurances for decentralized products. This includes the robustness of the governance mechanisms, such as timelocks on protocol upgrades and the DAO oversight.
- Instant Liquidity: An evaluation of whether the liquidity available in secondary markets or through issuer-backed buffers exceeds the value of the proposed allocation. Products with insufficient liquidity to meet this benchmark will be considered higher risk.
- Redemption Time: We will demand clear assurances regarding the redemption processing times for custodial products, ensuring that investors can reasonably expect timely access to their assets upon redemption requests.
Beyond the metrics above, we strongly advocate for a detailed explanation in each proposal, particularly concerning the requirements for investor onboarding. This will facilitate our analysis of whether Aave DAO can meet these requirements or if a special-purpose legal structure must be established to facilitate such compliance.