Blockchain technology has the potential to breathe new life into traditional assets, according to a cohort of crypto investors who are betting on the market for “tokenization”. Tokenization involves issuing blockchain-based digital tokens that represent assets such as bonds, stocks, and real estate. Over the past year, large finance firms like London Stock Exchange Group, WisdomTree, and Mirae Asset Securities have invested in token trading and investment platforms, while others like Franklin Templeton, UBS Asset Management, and ABN Amro have launched tokenized versions of assets such as money market funds and green bonds. Surveys have shown that a significant number of institutional investors in the US and high-net-worth investors plan to invest in tokenized assets in the near future. The appeal lies in the potential for savings on transaction costs, increased transparency, liquidity, reduced settlement times, and increased automation. However, critics argue that there are still significant hurdles to overcome, such as gaps in trading infrastructure, lack of global regulation, and limited traction with investors. Tokenized traditional assets currently represent a small portion of the wider cryptocurrency market, but some predict that digital assets could represent 5-10% of all assets by 2030. Despite the challenges, industry experts believe that now is different because large firms are showing senior level buy-in and are actively exploring tokenization projects.
