Bitwise Asset Management launched the PAPY real-world asset lending vault on Morpho on September 2. According to the company announcement, users deposit Agora’s AUSD stablecoin while the vault lends against approved tokenized collateral. Bitwise is targeting a variable annual percentage yield of 5%–6%, but says that estimate can change with borrower demand and protocol utilization.
PAPY Uses Whitelisted Tokenized Collateral
Borrowers must post assets from a predetermined collateral list. The initial set includes PST, sUSDai and PRIME, giving depositors exposure to several real-world credit structures rather than one crypto-native collateral type. Loans are overcollateralized, according to Bitwise, and interest rates are determined algorithmically.
Bitwise’s role is to set vault parameters, including eligible collateral, loan-to-value ratios and interest-rate configurations. The firm says it does not take custody of deposits or make discretionary decisions over individual user assets. Deposits remain in user-controlled wallets and Morpho smart contracts.
AUSD Provides the Vault’s Deposit Asset
PAPY accepts only AUSD at launch. Bitwise describes the stablecoin as backed by U.S. Treasury bills, overnight and reverse-repurchase agreements, and other liquid assets, with reserves managed by VanEck and custody provided by State Street. Agora has also expanded AUSD liquidity through Keyrock, providing context for its use in onchain credit products.
Bitwise Adds a Curated Morpho Strategy
The launch places a traditional asset manager in the vault-curation layer rather than the custody layer. Bitwise Investment Manager is registered with the U.S. Securities and Exchange Commission for a separate advisory business, but the release states that registration does not cover PAPY users and that the SEC has not approved the vault.
Morpho has increasingly been used for curated institutional stablecoin strategies. PAPY extends that model to a basket of tokenized credit collateral while keeping borrowing and repayment rules in the protocol.
Variable Yield Comes With DeFi and Credit Risks
The 5%–6% target is not a fixed return or guarantee. Bitwise says actual yield may be higher, lower or zero. Its disclosure lists smart-contract failures, oracle problems, collateral liquidation shortfalls, stablecoin depegging, RWA issuer defaults and regulatory changes among the risks, including possible total loss. That makes the launch a new onchain credit route, not a risk-free Treasury substitute.
