Tokenisation has become Wall Street’s latest favourite crypto buzzword.

Tokenisation, or creating digital representations of real-world assets on a blockchain, has become one of this year’s buzzwords in both conventional and crypto finance circles.

• Bitcoin’s record-breaking rally is rekindling hope that the digital-ledger technology that underpins cryptocurrencies will revolutionise everything from recording the ownership of houses to bonds.

The excitement is reminiscent of the hype of a few years ago surrounding the use of blockchains.

• For everything from tracking lettuce at Walmart Inc.
• To digitising stocks that proved to be premature.

For years, tokenisation of assets beyond stablecoins that serve as a proxy for actual currencies in crypto trading has flagged.

According to data tracker RWA. XYZ,

• Only 67,530 parties—mainly institutions—hold tokenised assets that aren’t stablecoins.

Researcher Opimas says.

• Just 0.003% of the total value of the world’s assets has been tokenised, and many companies behind the projects are on the brink of going out of business,

An unfavourable US regulatory regime was to blame in large part.

• For years, regulators encouraged banks to avoid crypto and related risks.
• While tokenised securities run on blockchains and adhere to the same rules as traditional securities, regulators often lumped them together with crypto as deserving heightened scrutiny. So many financial services providers choose to stay away and instead invest in areas like AI.
• That’s starting to change, as President-elect Donald Trump plans for a more favourable regulatory regime for crypto, with the world’s biggest asset manager, BlackRock Inc., launching a tokenised money-market fund this year. That’s pushing others to follow.

Charlie You, co-founder of RWA.XYZ said:-

• “Now they felt like they can do something and sped up their timeline a lot, whereas previously they were just watching,”
• “They are making things happen.”

Gearing up for more traction, card network Visa Inc. rolled out a platform that lets banks issue fiat-based tokens in October.

In November, stablecoin issuer Tether launched a tokenisation platform.

The same month, Mastercard announced:-

• It’s connected its token network with JPMorgan Chase to settle cross-border business-to-business transactions on the bank’s Kinexys blockchain-based platform.
• https://holder.io/news/jpmorgan-kinexys-usd-eur-settlements/#:~:text=JPMorgan%20has%20launched%20an%20update%20to%20its%20blockchain,a%20key%20player%20in%20global%20blockchain-based%20financial%20services.
• Mastercard sees an opportunity to introduce such payment schemes to more financial institutions.

Raj Dhamodharan, executive vice president of blockchain and digital assets at Mastercard, said:-

• “That’s a clear trend that will continue to evolve and unlock many new business models.
• That trend is here to stay,”

According to JPMorgan

• Kinexys already supports about $2 billion in transactions per day,

A slew of money-market funds — many investing in US Treasuries — are planning to debut.

• Boston Consulting Group predicts that tokenised fund assets under management could reach more than $600 billion by 2030, up from about $2 billion today.
• To make such tokens more useful, the Commodity Futures Trading Commission is considering new guidelines for how to use tokenised assets as collateral.

Tokenisation is also touted as increasing an asset’s liquidity, making it accessible to more investors while cutting costs and transaction time.

Rob Krugman, chief digital officer at Broadridge, which has tokenised trillions of dollars’ worth of repos, said:

• “By tokenising those assets, it enables natural efficiency,”
• “It may even be bigger than the internet.
• It’s fundamentally rethinking the way the markets work.”

Still, some industry participants worry the stampede could lead to tokenising assets that shouldn’t be tokenised and expose investors to new risks, such as hacks.

Investors may also unwittingly pay higher fees for tokenised products versus traditional products or for assets that are hard to sell.

Nathan Allman, CEO at Ondo Finance, said:

• “You sort of end up with a lot of poorly priced assets being sold to not-so-sophisticated investors,”
• “Outside of Treasuries, I think tokenised public securities have almost no value.
• Really, no one has done public securities well.
• The majority of projects in this space are unfortunately trying to distribute low quality, poorly priced assets.”

Carlos Domingo, CEO of tokenisation platform Securitize, says:-

• He isn’t sold on tokenising real estate.

Noelle Acheson, author of Crypto is Macro Now newsletter, believes in tokenising private equity.

• “Feels a little more to me as a solution looking for a problem.”
• After all, many private companies provide equity to selected partners — and they don’t want them to sell it to others.
• Buying a piece of a tokenised Picasso leaves the buyer without the pleasure of enjoying the actual art.

On the other hand, tokenisation can also reduce some risks.

You said:-

• Greater automation that comes with adding programmability to blockchain-based tokens can reduce some counterparty risk, as assets can be put into escrow, for example, to be released upon delivery of goods, for example,

Capco analysts did see the need to renovate the electronic payment systems invented decades ago. Using blockchain to make money more programmable can improve the efficiency of the payments workflow, but it will take time.

Ervinas Janavicius, managing principal at Capco said:-

• “There are a lot of opportunities, we don’t disagree with that, but there is still a lot of work to be done,”

Source

• https://www.bloomberg.com/news/articles/2024-12-27/tokenization-has-become-wall-street-s-latest-favorite-crypto-buzzword