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Tokenizing real-world assets on a blockchain is one in all the buzziest topics of the yr, and this time it is not only coming from financial incumbents like Citi, JPMorgan and Northern Trust, it’s coming from crypto native players, too.
The initial hype around tokenization using blockchains began around 2015 amongst banks who said they may never embrace bitcoin or cryptocurrencies, but that their underlying ledger technology could potentially be a game changer by making way for twenty-four/7 settlement, guaranteed execution and lower transaction fees. Because the world of crypto becomes more connected to the broader financial market, the appetite for tokenizing real-world assets, or RWA, is coming from smaller participants as well.
“When RWA first began trending we checked out institutions like high net price individuals, family offices, pension funds [and] university endowments – and that is still true but there was the emergence of what I might consider as on-chain institutions,” Maria Shen, a general partner at Electric Capital, told CNBC.
For instance, the DeFi protocol MakerDAO.
“MakerDAOÂ works with institutions that borrow dai, which is the stablecoin, and effectively tokenize T-bills that MakerDAOÂ then uses in its ecosystem,” Shen said. “That is been a very interesting shift that is never happened before.”
She broke it down into retail users who can use RWAs for remittances and savings, businesses that use stablecoins to pay suppliers and in-chain institutions like MakerDAO that attempt to access yield through tokenized Treasurys.
Kraken Ventures’ Stuti Pandey said since tokenization’s last hype cycle, RWAs have benefited from changes in economics, technology and credibility.
“Over the past few years, rates of interest have been very depressed and that has favored very high growth, high risk assets,” she said. “In decentralized finance, you had synthetic yields between 80% and 200%, so RWAs didn’t really have a probability to thrive. Now that rates are down, it’s actually these real-world assets which have interesting yield.”
They also can profit from higher tokenization infrastructure and get mindshare this time around, she added.
