While critics wrote off much of the initial hype surrounding the tokenized real-world asset (RWA) market, the sector has been on a tear over the past year or so. In fact, Boston Consulting Group expects<\/a> the tokenization of global illiquid assets to be a $16 trillion industry by the end of the decade.<\/p>\n A variety of asset categories are actively being tokenized and garnering investments, with recent data suggesting<\/a> that the total value of tokenized real-world assets reached an all-time high of $2.75 billion in August. And while the metric has slipped since then, it still stands at around a respectable $2.49 billion as of Sept. 30.<\/p>\n As per a joint survey by research and advisory firm Celent and American banking behemoth BNY Mellon, 91% of institutional investors are interested<\/a> in putting their money into tokenized assets, with 97% agreeing that tokenization stands to revolutionize the realm of asset management.<\/p>\n Matthijs de Vries, co-founder of AllianceBlock \u2014 a firm building a decentralized tokenized market \u2014 told Cointelegraph that these types of statistics give a glimpse into the impact that institutional-grade investments have on the industry. <\/p>\n \u201cThis trend is expected to result in exponential growth in the tokenized RWA industry, particularly as more liquidity flows into the space. This will lead to a more sustainable bull market with less capital flight at its peak,\u201d he added.<\/p>\n From the outside looking in, the tokenization of RWAs seems to be gaining momentum due to improved regulatory clarity in specific jurisdictions (such as Switzerland) and successful pilot projects. <\/p>\n De Vries said the unsustainable yields in decentralized finance (DeFi), which led to the collapse of many major crypto projects in 2022, have prompted investors to seek sustainable, real yields \u2014 such as the ones available with tokenized RWAs. <\/p>\n He elaborated: \u201cInvestors are now looking for transparent explanations of where these yields come from, making tokenized RWAs more attractive due to their clear yield sources and increased recognition from traditional players.\u201d<\/p>\n \u201cInvestors have started to realize that if you can\u2019t easily explain where the yield comes from, it\u2019s probably going to collapse at some point. With tokenized RWAs, the source of the yield can be easily explained to crypto natives and new participants.\u201d<\/p><\/blockquote>\n Real estate is one area in which tokenization has had a significant impact. As things stand, it is the largest asset class in the world, with an estimated<\/a> $613 trillion value in 2023.\u00a0<\/p>\n Between Q1 and Q3 2023, the value of on-chain real estate grew by 102%, or approximately $90 million.<\/p>\n The aggregate value of assets tokenized, which in some cases represent fractionalized claims on real estate, stands at $178 million as of Sept. 30. RealT, an issuer of tokenized real estate, holds the lion\u2019s share of the market. Tangible, a fellow issuer of real estate-centric RWAs, witnessed the most growth among its peers. The total value of Tangible\u2019s tokens soared from a mere $100,000 to an impressive $64 million over the first three quarters of 2023.<\/p>\n Bernard Lau, co-founder and CEO of blockchain-based real estate investment company Labs Group, told Cointelegraph that tokenizing real estate is probably the best use for this technology today. Due to its stability and tangible asset value, Lau believes real estate stands out from others as a very solid investment.<\/p>\n Recent:\u00a0Meet the guerilla artist who staged a crypto \u2018rug pull\u2019 in front of the SEC<\/a><\/em><\/strong><\/p>\n \u201cPreviously, many investors from lower economic backgrounds found themselves left out of the real estate game due to the entry barrier that was just too high,\u201d he said. \u201cAnd since many found themselves out of this equation, they turned to investing in stocks and bonds. However, now that individuals can invest in fractions of houses, buildings or even resorts, more people can participate, fueling the growth we observe in the market.\u201d<\/p>\n While real estate has undoubtedly been a popular use case for tokenization, de Vries believes this space could face numerous challenges moving forward \u2014 primarily due to differing laws and registries across different jurisdictions. In his view, tokenization translates more seamlessly within asset classes like exclusive collectibles, diamonds, luxury watches, classic cars, securities and even carbon credits.<\/p>\n Moreover, tokenization\u2019s influence can also be actively felt within the realm of traditional finance, especially in relation to popular instruments such as bonds, stocks and exchange-traded funds (ETFs). Adam Levi, co-founder of Backed \u2014 a platform for tokenized real-world assets \u2014 told Cointelegraph that this transition is a natural one:<\/p>\n \u201cThe market needs stable yields. In a bear market, fixed-income products provide this. Globally, interest rates are up, and everyone wants to capitalize on this near-risk-free yield.\u00a0We have not seen much interest in tokenized equities at the moment despite the S&P 500 being up around 17% year-to-date. However, we\u2019ve particularly seen growing demand for non-USD-denominated fixed-income products.\u201d<\/p><\/blockquote>\n Angle Protocol recently launched<\/a> the first yield-bearing stable euro using bC3M, a tokenized euro-denominated fixed-income ETF. Similarly, Backed has launched three euro-denominated products as part of its financial repertoire. \u201cWe are exploring GBP and BRL ETFs next,\u201d Levi added.<\/p>\n In recent months, the valuation of tokenized U.S. Treasury bills, bonds and money markets has scaled up to a whopping $685 million<\/a>. The allure of tokenized Treasurys has been growing among digital asset aficionados, especially since the yield on U.S. government bonds \u2014 broadly perceived as a risk-free interest rate \u2014 has now overshadowed the yields delivered by most DeFi offerings.<\/p>\n During 2023 alone, the market has seen the debut of several new players, such as OpenEden, Ondo Finance and Maple Finance \u2014 each unveiling their own blockchain-centric Treasury products aimed at adept investors, digital asset enterprises and decentralized autonomous organizations. <\/p>\n Owing to these rapidly emerging trends, researchers at Bernstein Private Wealth Management believe that by 2028, about 2% of the global money supply \u2014 via stablecoins and central bank digital currencies \u2014 could be tokenized, bringing the sector\u2019s valuation to $5 trillion.<\/p>\n Earlier this month, banking behemoths UBS and JPMorgan made significant strides in asset tokenization, unveiling platforms to facilitate seamless interaction between traditional financial assets and blockchain technology. UBS, for example, announced the live pilot<\/a> of a tokenized variable capital company (VCC) fund under the moniker Project Guardian, steered by Singapore\u2019s central bank. <\/p>\n This endeavor, part of a broader VCC umbrella, aims to usher various real-world assets onto the blockchain. UBS Asset Management \u2014 via its in-house UBS Tokenize service \u2014 has already conducted a controlled pilot of the tokenized money market fund, engaging in activities such as redemptions and fund subscriptions.<\/p>\n According to Thomas Kaegi, head of UBS Asset Management in Singapore and Southeast Asia, the project is a pivotal step toward deciphering the intricacies of fund tokenization, hoping to bolster market liquidity and accessibility for clients.<\/p>\n JPMorgan rolled out its blockchain-based tokenization platform<\/a> \u2014 the Tokenized Collateral Network (TCN) \u2014 with asset management colossus BlackRock among its inaugural clientele. The platform, designed to transform traditional assets into digital counterparts, executed its first trade by transmuting shares of a money market fund into digital tokens. <\/p>\n This pioneering transaction between JPMorgan and BlackRock saw the assets transferred to Barclays Bank serving as collateral for an over-the-counter derivatives exchange between the entities. <\/p>\n The TCN, having undergone its maiden internal testing in May 2022, now boasts a burgeoning pipeline of clients and transactions, aiming to expedite traditional settlements on the blockchain. In a statement<\/a>, Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, emphasized the platform\u2019s capacity to unlock capital for utilization as collateral in ongoing transactions, thereby increasing efficiency.<\/p>\n Untangled Finance, a marketplace for tokenized RWAs, recently launched on the Celo network after receiving<\/a> a $13.5 million venture capital injection, spearheaded by London\u2019s Fasanara Capital, to transfer tokenized private credit to the blockchain. <\/p>\n The platform \u2014 anticipated to expand to the Ethereum and Polygon ecosystem via Chainlink\u2019s Cross-Chain Interoperability Protocol \u2014 aims to elevate the present $550 million worth of private credit on DeFi rails closer to the traditional private credit market\u2019s massive $1 trillion valuation. <\/p>\n Moreover, in late 2022, asset manager WisdomTree unveiled nine digital, tokenized funds,<\/a> adding to the one it started successfully earlier in the year. The funds allow the transfer agent to keep a secondary record of shares on the Stellar or Ethereum blockchains. <\/p>\n Magazine:\u00a0Beyond crypto: Zero-knowledge proofs show potential from voting to finance<\/a><\/em><\/strong><\/p>\n In February 2023, Hong Kong\u2019s central bank offered an inaugural $100 million tokenized green, or sustainable investment, bond<\/a>. Meanwhile, in April, French investment bank Credit Agricole CIB and Swedish bank SEB agreed to develop a blockchain-based platform for tokenized bonds<\/a>.<\/p>\nWhy the sudden spike in interest?<\/h3>\n
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Beyond property investments <\/h3>\n
Tokenized U.S. Treasurys <\/h3>\n
UBS\u2019s and JPMorgan\u2019s tokenization ventures<\/h3>\n
More noteworthy developments surrounding the space<\/h3>\n