Tokenizing tangible assets on blockchain technology holds appeal not only for crypto enthusiasts but also for skeptics within the crypto realm. As the cryptocurrency landscape becomes increasingly intertwined with the broader financial market, the desire to tokenize real-world assets is gaining traction even among seasoned crypto aficionados. Maria Shen, a general partner at Electric Capital, conveyed to CNBC the diverse spectrum of stakeholders embracing this trend, ranging from retail users employing RWAs for settlements and savings to corporations utilizing stablecoins for supplier payments, and in-chain entities like MakerDAO endeavoring to access yields through the tokenization of Treasuries. Stuti Pandey of Kraken Adventures highlighted how RWAs have benefited from shifts in economics, technology, and credibility.
The concept of tokenizing tangible assets on a blockchain has emerged as one of the most discussed topics of the year. What sets this discourse apart is that it's not solely the purview of traditional financial heavyweights such as Citi, JPMorgan, and Northern Trust; crypto-native participants are also actively engaging in it.
The initial buzz surrounding asset tokenization via blockchain technology began around 2015, with banks initially asserting their reluctance to embrace Bitcoin or cryptocurrencies. However, they recognized that their underlying ledger technology held the potential to revolutionize the financial landscape by facilitating 24/7 settlements, ensuring reliability in execution, and reducing transaction costs. As the cryptocurrency sphere becomes increasingly entwined with the broader financial sector, the demand for the tokenization of real-world assets, abbreviated as RWAs, has extended to smaller players in the field.
Maria Shen, a general partner at Electric Capital, elucidated the evolving landscape. She noted that while RWAs initially garnered attention from institutions like high-net-worth individuals, family offices, pension funds, and university endowments, a new category of on-chain enterprises has emerged. One notable example is the DeFi protocol MakerDAO.
"MakerDAO collaborates with entities that acquire dai, the stablecoin, and effectively tokenize T-bills, which MakerDAO subsequently integrates into its ecosystem," Shen elaborated. "This represents a truly intriguing development that has never been witnessed before." She further delineated three key categories of participants: retail users who employ RWAs for settlements and savings, enterprises utilizing stablecoins for supplier payments, and in-chain institutions like MakerDAO, which aim to capitalize on tokenized Treasuries.
Stuti Pandey of Kraken Adventures observed that since the previous wave of tokenization, RWAs have benefited from shifts in economic conditions, technological advancements, and enhanced credibility. "Over the past few years, interest rates have remained exceptionally low, resulting in a surge in high-risk assets," she explained. "In the realm of decentralized finance, yields ranging from 80% to 200% were artificially generated, leaving little room for RWAs to flourish. Now, with interest rates declining, these tangible assets are proving to offer intriguing yields."
Pandey also pointed out that improved tokenization infrastructure and increased attention from market participants are contributing to the renewed interest in RWAs.
In conclusion, the tokenization of tangible assets on blockchain technology has evolved from a niche concept discussed primarily by traditional financial institutions to a phenomenon embraced by a diverse array of stakeholders, including on-chain entities. This transformation has been driven by a confluence of economic factors, technological advancements, and growing credibility in the space. As the cryptocurrency landscape continues to evolve, the tokenization of real-world assets is poised to play an increasingly prominent role in the financial ecosystem.