A cohort of crypto investors, who are betting on blockchain technology, breathe fresh life into traditional assets, said blockchain tech is a bit old hat.
As crypto prices spiral outward, the market for 'tokenization', which is issuance of blockchain-based digital tokens that contain 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. Other assets such as money market funds and green bonds have been tokenized, including Franklin Templeton, UBS Asset Management and ABN Amro.
More than a third of institutional investors in the US and almost two-thirds of high-net-worth investors plans 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.
Cryptoverse: Pokmons and a resurrection of NFTs and Punk apes.
It's possible for savings on transaction costs that have big investment players circling, says Colin Butler, global head of institutional capital at blockchain firm Polygon Labs.
This is a knife fight right now for market share and profits, and these cost-reduction ideas are very powerful, he added, adding that institutions had spent years studying tokenization and were now more comfortable launching projects.
Backers say tokenization provides traditional finance with more transparent trading, increased liquidity, plus reduced costs and settlement times by automating processes via smart contracts, blockchain-based covenants that settle automatically.
The other side of the argument is that the trading infrastructure is in a critical state, a lack of effective global regulation and limited traction with investors. The value and issuance of tokenized traditional assets remains small, despite the fact that they are not monetized.
Dune Analytics data shows that the market cap for tokenized public securities is $345 million, a sliver of the 1 trillion wider cryptocurrency market. Those tokens have experienced 2.3 percent growth during the last 30 days, lagging behind Bitcoin's rise of about 10 percent in the same period.
Some may see a larger future, though: a joint report by Northern Trust and HSBC earlier this year estimated that 5 percent to 10 percent of all assets would be digital by 2030.
While the idea of tokenization has been around for almost as long as bitcoin, the booming market hasn't been as successful as it has ever been. Some market players are now experiencing significant progress.
re seeing senior level buy-in from big firms, said Morgan Krupetsky, head of institutions & capital markets at Ava Labs.
The market's mood is still shaken up, with market participants also saying, among other things, that there is no need for larger trading pools. Some are optimistic, others are less optimistic.