Crypto investors bet on blockchain revival

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Crypto investors bet on blockchain revival

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

As crypto prices surge, the market for tokenization - issuance of blockchain-based digital tokens that encompass assets like bonds, stocks, and real estate - may finally reach a critical mass.

Over the past year, London Stock Exchange Group, WisdomTree and Mirae Asset Securities have either started or are looking to develop token trading and investment platforms. Other assets such as money market funds and green bonds have been tokenized by others such as 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 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.

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

It's a knife fight right now for market share and profits, and 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 say 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.

The other side of the coin, critics say, there are large trading infrastructure weaknesses, a lack of coherent global regulation and limited traction with investors. The actual issuance and value of tokenized traditional assets remain relatively small, despite the fact that the actual issuance and value of tokenized traditional assets is still relatively small.

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

Although some will see a bigger future, 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 a long time, the rapidly expanding market hasn't made it to the point where it's been met with a lot of apprehension. Some market players have seen significant progress.

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

The crisis remains, with market participants pointing to, among other things, the need for larger trading pools. Some are optimistic, but others are pessimistic.