Crypto investors see progress on blockchain

Crypto investors see progress on blockchain

It's a little old hat, says a cohort of crypto investors who are betting on blockchain technology breathing new life into traditional assets.

As crypto prices continue to surge, the market for 'tokenization' - releasing blockchain-based digital tokens that represent assets such as bonds, stocks, and real estate - may finally reach a critical mass.

London Stock Exchange Group, WisdomTree and Mirae Asset Securities have either invested in token trading and investment platforms over the past year or are in talks to develop them. Franklin Templeton, UBS Asset Management and ABN Amro have launched tokenized versions of assets like money market funds and green bonds.

More than a third of institutional investors in the United States and almost two-thirds of high-net-worth investors plan to invest in tokenized assets this year or next, according to two surveys of more than 300 players in total conducted by EY-Parthenon in May.

It's possible for savings on transaction costs that have big investment players circling, according to Colin Butler, global head of institution capital at blockchain firm Polygon Labs.

It's a knife fight right now for market share and profits, so these cost-reduction ideas are very powerful, he said, adding that institutions had spent years studying tokenization and were now more comfortable launching projects.

Backers contend that tokenization offers traditional finance more transparent trading, increased liquidity, plus reduced costs and settlement times by automating processes via smart contracts - blockchain-based covenants that settle automatically.

However, critics contend that trading infrastructure is inadequate, a lack of consistent worldwide regulation and still limited traction with investors. The tokenized traditional assets' actual issuance and value remains limited.

The market cap of tokenized securities is $345 million, a sliver of the 1 trillion larger cryptocurrency market, according to Dune Analytics data. Those new tokens have experienced 2.3 percent growth over the last 30 days, lagging Bitcoin's rise of about 10 percent over the same period.

Some see a bigger future, though: A joint report by Northern Trust and HSBC earlier this year estimated that 5 per cent to 10 per cent of all assets would be digital by 2030.

Although the concept of tokenization has been around for centuries, the thriving market hasn't lived up to much hype. Market players now see significant progress.

Reseeing senior level buy-in from big firms, said Morgan Krupetsky, head of institutions & capital markets at Ava Labs.

Market participants pointing to the need for greater trading pools, among other things, have been cited as a source of tension. Some are optimistic.