The CFO and Treasurer’s Guide to Digital Assets – Crypto News

Blockchain technology was meant to disrupt payments and finance. But while the payments space, at least in the U.S., remains in waiting for a crypto-led transformation, it is across capital markets where traditional approaches are already undergoing a quiet on-chain revolution thanks to the tokenization of real-world assets (RWAs).

With the news this week that private equity and insurance giant Apollo has made a strategic investment in Plume, a blockchain platform focused on RWAs, boardrooms and treasury offices are now paying closer attention to efficiencies gained by turning real-world assets into digital ones through tokenization.

The Plume investment follows Apollo’s January partnership with RWA infrastructure provider Securitize to tokenize investment opportunities.

As digital transformation reshapes capital markets, RWAs represent a potent convergence of blockchain technology and traditional finance. For chief financial officers (CFOs) and corporate treasurers charged with steering balance sheets, optimizing liquidity and mitigating risk, RWAs could offer both compelling opportunities as well as new layers of complexity.

Unlike cryptocurrencies, which derive their value from consensus and scarcity, RWAs are anchored in real-world value and can often generate cash flow. For CFOs, this shift signals a move from speculative digital assets toward instruments that might be able to play tangible roles in liquidity management, yield generation and even collateralization strategies.

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The Institutional Shift Toward RWAs

Real-world assets are tangible or intangible assets — such as U.S. Treasuries, real estate, invoices, carbon credits, securities or even art — that have been tokenized and placed on a blockchain. Tokenization refers to the process of issuing a digital token that represents ownership or a claim on an underlying asset. These digital representations are often embedded with smart contracts that automate compliance, yield disbursements and governance functions.

Once these assets are tokenized, organizations and enterprises can take advantage of automated processes on various blockchains which can reduce transaction fees, streamline settlement times and enhance operational efficiency. Additionally, tokenizing traditionally illiquid assets makes them easier to buy, sell and trade on secondary markets.

Major financial players, and not just Apollo, are taking RWAs seriously. BlackRock recently launched its first tokenized fund on the Ethereum blockchain, backed by short-term U.S. Treasurys. JPMorgan’s Onyx platform has already settled billions in tokenized collateral transfers, while Citigroup partnered with Wellington Management and WisdomTree to explore the tokenization of private markets.

Earlier this year, it was also announced that Ondo Finance would be the first provider to bring real-world assets to Mastercard’s Multi-Token Network (MTN).

“Banks are in the state where they are thinking about blockchains as public infrastructure that they need to rely on,” Chainalysis Co-founder and CEO Jonathan Levin told PYMNTS. “Back in 2014 … cryptocurrency only meant blockchains that had native cryptocurrency tokens. Today, people are putting all types of financial instruments on the blockchain.”

For CFOs and treasurers responsible for safeguarding corporate capital and ensuring optimal deployment, RWAs present novel use cases across several financial disciplines.

See also: Stablecoin Sandwiches? Here’s What CFOs Need to Know About Crypto Jargon

Strategic Considerations for CFOs and Treasurers

Digital asset fluency is quickly becoming a core competency for finance teams. The blockchain can offer CFOs and treasurers a powerful toolkit, but, like all advanced technologies, it is one that must be wielded with precision and foresight.

PYMNTS Intelligence this year found that blockchain technology has numerous potential benefits to serve the unique needs of regulated industries, including finance, healthcare, identity verification and supply chain management, to name a few.

But holding tokenized assets requires secure digital custody solutions. Custodians must be vetted not only for cybersecurity but also for their legal and compliance frameworks. Additionally, many RWA platforms still rely on centralized issuers who can pose operational or credit risk.

Among the biggest uncertainty impacting the RWA space, just as with the rest of the on-chain economy, is the lack of operational clarity around regulation in the U.S. marketplace. But the tide is beginning to turn.

“The largest financial institutions are eager to explore tokenized assets,” Nikola Plecas, head of commercialization, Visa Crypto, told PYMNTS, but added that they require regulatory certainty to do so at scale.

PYMNTS covered Wednesday (April 9) how crypto industry participants and attorneys told a House subcommittee that existing regulations from the SEC lack clarity and are outdated, while the lawmakers in attendance said new legislation tied to market structure and oversight would be forthcoming.