Tokenization is emerging as a central element in the connection that is taking place between traditional finance and cryptocurrencies, with the help of blockchain. This innovation is presented as essential to the modernization of US markets, provided that liquidity can keep pace.
Market tokenization within two years
Many players in traditional finance seem to accept that the principle of tokenizing real-world assets (RWA) will reshuffle the cards in certain sectors, from the real estate market to stock exchanges and Treasury bonds.
This transformation is already well underway, led by global asset management leader BlackRock with the launch of its BUIDL fund, which is particularly well established in the booming US Treasury bond market, as well as by certain banking giants keen to tokenize their customers’ deposits and transfers.
But this is only the beginning of something much bigger, according to recent statements by US SEC chief Paul Atkins on the financial news channel Fox Business. He sees tokenization as “the key to modernizing US markets” in the coming years.
The next step comes with crypto-assets and market tokenization, and this will bring enormous benefits, particularly by reducing risk and making things much more predictable and transparent on-chain.
For Paul Atkins, tokenization should provide a solution to recurring issues in traditional finance, such as lack of transparency, market accessibility, and risks related to settlement and delivery times, to the point where it will become the dominant model within two years.
A market still in search of liquidity
However, some experts remain skeptical, such as Carlos Domingo, co-founder and CEO of Securitize, a company specializing in providing tokenization infrastructure for players such as BlackRock and its BUIDL fund. The issue is that theoretical accessibility will first need to be backed up by available liquidity in practice.
Providing liquidity to an asset class appears to be as important as ensuring its accessibility. There was this impression that tokenization would make illiquid assets liquid, and that didn’t happen, because an illiquid asset remains illiquid whether you tokenize it or not.
Carlos Domingo
Currently, the tokenization market—estimated at $18 billion—focuses exclusively on highly liquid sectors, to the point of establishing the dollar as “the most successful tokenized asset” with a stablecoin market estimated at $300 billion.
At the same time, tokenized US Treasury bills have a valuation of nearly $9 billion, while stocks struggle to accumulate $640 million.
